ANNUAL REPOR T 2008

Corporate Office: Grameenphone Ltd. Celebration Point, Plot 3 & 5, Road 113/A annual Gulshan, Dhaka 1212, Bangladesh Tel: (880) 2 9882990 report’08 Fax: (880) 2 9882970 email: [email protected] Website: www.grameenphone.com

Grameenphone wants to contribute to meet climate challenges and aims to reduce the consumption of resources and overall impact on the environment. In an effort to minimize paper consumption, we limit the scope of the printed annual report. Grameenphone’s website provides extensive information about the company and current activities: www.grameenphone.com.

Back Page Cover Page Contents

This is Grameenphone 2 Corporate Directory 4

Our Vision & Values 6 Business Overview 8 CEO's Message 12 The Shareholders 14 Directors' Profile 18 Directors' Report 20 Organizational Structure 29 Profile of the Management Team 30

Three Years Financial Summary 34 Value Added Statement 36 Contribution to National Exchequer 38

Auditors' Report 41 Balance Sheet 42 Profit & Loss Account 43 Statement of Changes in Equity 45 Cash Flow Statement 45 Notes to the Financial Statements 46

Corporate Governance in Grameenphone 82 Report on Corporate Social Responsibility (CSR) 88 Environmental Management in Grameenphone 92 Report on Health Safety Security & Environment (HSSE) 96 Report on Human Resource (HR) 98 Codes of Conduct 102

Products & Services 106

Useful Information for Shareholders 110 Disclaimer 112 This is

Grameenphone Grameenphone Ltd., the largest telecommunications service provider in Bangladesh, received its operating license in November 1996 and started its service from March 26, 1997, the Independence Day of Bangladesh.

Now, after 11 years of successful operations, Grameenphone is the largest mobile phone service provider in Bangladesh, with nearly 21 million subscribers as of December 2008.

Grameenphone provides services to rural and urban customers across Bangladesh, where mobile telephony is acknowledged as a significant driver of socio-economic development, both for individuals and the nation.

GP AR’08 2 3

02_Page Page_03 Board of Directors Chief Financial Officer Arif Al Islam Chairman Sigve Brekke Head of Internal Audit Farhad F. Ahmad Directors Ole Bjorn Sjulstad Auditors Per Erik Hylland Rahman Rahman Huq Corporate Directory M. Shahjahan Chartered Accountants Dipal Chandra Barua Legal Advisor Company Secretary Hasan & Associates Raihan Shamsi Main Bankers Audit Committee Citibank N. A. Dipal Chandra Barua Standard Chartered Bank Per Erik Hylland Hong Kong Shanghai Banking Corporation Eastern Bank Ltd. Treasury Committee One Bank Ltd. M. Shahjahan BRAC Bank Ltd. Knut Borgen The City Bank Ltd. Arif Al Islam Registered Office Management Team Celebration Point Oddvar Hesjedal, Chief Executive Officer Plot # 3 & 5, Road # 113/A Arif Al Islam, Deputy Chief Executive Officer & CFO Gulshan -2, Dhaka -1212 Titus Dan, Chief Marketing Officer Frode Stoldal, Chief Technology Officer Rubaba Dowla, Chief Communications Officer Raihan Shamsi, Chief Corporate Affairs Officer & CS Arnfinn Groven, Chief Human Resources Officer

GP AR’08 4 5

04_Page Page_05 Our Vision "We are here to HELP" We exist to help our customers get the full benefit of communications services in their daily lives. We want to make it easy for customers to get what they want, when they want it.

Our Values MAKE IT EASY We are practical. Everything we produce should be easy to understand and use, because we never forget we are trying to make our customers' lives easier. BE INSPIRING We are creative. We bring energy and imagination to our work. We want to be a partner in the development of our community. We are passionate about our business, customers and our country. KEEP PROMISES Everything we set out to do should work. If it does not, we are there to put things right. We are about delivery, not over promising - actions not words. BE RESPECTFUL Our We acknowledge and respect the local culture. We are respectful and professional in regard to all our interactions, both internally Vision & and externally. We are open, helpful and friendly. Values "We are here to HELP"

GP AR’08 6 7

06_Page Page_07 Business Overview

2008: A year to celebrate The number of subscriptions Grameenphone Ltd. had another successful year to celebrate, in a year that saw increased by 4.5 million through subscriber figures cross the 20 million mark, from just 16 million in the beginning of 2008. This was also a year that revenue went up by 13%, compared to 2007, to 2008, and subscriber base for the nearly BDT 61 billion (or BDT 6,100 crore). company has been reported to be The number of subscriptions increased by 4.5 million through 2008, and subscriber base for the company has been reported to be over 20 million, which over 20 million, which means that means that Grameenphone ended the year with a market share of around 47%. Grameenphone ended the year Significantly a major development for the company was the appointment of Oddvar Hesjedal as the new CEO of Grameenphone in November 2008. Oddvar with a market share of around 47%. served as Grameenphone's Chief Technology Officer since June 2008. Prior to joining Grameenphone, he has held various top management positions within the Telenor Group. He was CTO of Kyivstar, Ukraine in 2004-06. Another significant change for Grameenphone operations was the selection of Huawei Technologies Co. Ltd. as the 2nd vendor for the expansion and enhancement of the company’s next generation GSM core and radio network. In terms of business shifts, the year 2008 was launched on the brand promise to “Stay Close” and make services more affordable and relevant for a wider segment of the population. The company’s business activities and expansion plans were focused on making these promises real. Keeping with that promise, by the end of the year, Grameenphone was able to open up PSTN connectivity for all smile and djuice subscribers – previously customers with only mobile to mobile connectivity; a direct result of which over 20 million Grameenphone subscribers can now have complete connectivity - connecting to or receiving calls from any phone, both locally and internationally. Presently the Grameenphone network covers almost the entire population with more than 11,800 base stations located at over 6,800 sites in operation around the country. The network is also fully EDGE/GPRS enabled, allowing the customers to access high-speed internet from anywhere within its coverage area. IPO Status The biggest news for 2008, however, was the launching of the Initial Public Offering (IPO) process in July. The final application for an IPO of US$65 million (BDT 4.49 billion) was filed with the Securities and Exchange Commission (SEC) in December 2008. A pre-IPO private placement process, amounting to US$60 million (BDT 4.13 billion), to local institutional investors was completed in December 4, 2008. Following the completion of the pre-IPO private placement process, Grameenphone submitted its IPO application to the SEC on 11th December 2008 and delivered its final submission of the prospectus, incorporating the SEC’s feedback on 28th January 2009. Grameenphone is awaiting decision from SEC on its application at the time of printing of this Annual Report.

GP AR’08 8 9

08_Page Page_09 Business highlights As the country’s highest corporate tax-payer, in 2008 Grameenphone contributed BDT 31.72 billion Through 2008 Grameenphone products and services that pushed the boundaries of (BDT 3,172 crore) to the National Exchequer in direct taxes, VAT and duties, and through the BTRC. In communication and commerce in Bangladesh were launched and expanded on. The first launch in addition, Grameenphone paid BDT 3.35 billion (BDT 335 crore) through commercial agreements with 2008 was the BlackBerry® service – one of the most innovative and prestigious corporate Bangladesh Railway (BR) and Bangladesh Telecommunications Company Limited (BTCL). communication tools – for the first time in Bangladesh. Grameenphone is already the second-highest VAT payer in the country, after British American Tobacco Economy ISD (EISD) rates were introduced for subscribers, giving over 20 million people in the Bangladesh Company Limited (BATB), since 2007. Grameenphone family the opportunity to stay close and communicate with their near and dear Award & Recognition ones abroad. Staying close to local near and dear ones, was also addressed with the Friends & Last year saw Grameenphone win, not one but, two international awards for one of its innovative Family rates reduced to 25 paisa per minute for 24 hours. market-access services, CellBazaar. The service won the 3GSMA Global Awards in the category of “Best 2008 also saw mobile service expand to the three Chittagong Hill Tracts areas of Bandarban, Use of Mobile for Social & Economic Development,” at the Barcelona meeting in February, and again Khagrachari and Rangamati bringing Grameenphone’s network and EDGE/GPRS coverage to the Asian Telecom Award as the “Asian Telecom Innovation of the Year” in May. almost 100 percent of the country. This was for the first time that Telecom Asia had introduced the "Innovation of the Year" award, and The company had also acquired additional 7.4 Mhz GSM frequency that was auctioned off by the Grameenphone was proud to be the first receiver of this prestigious award. Bangladesh Telecommunication Regulatory Commission (BTRC) – the telecom regulatory CellBazaar is a one to many market access tool introduced by Grameenphone. The concept was authority for Bangladesh. This additional frequency was tantamount in providing better service developed at the MIT Media Lab by Mr. Kamal Quadir, who later founded a company under the same quality for Grameenphone subscribers and also opening up PSTN or landline connectivity to all name and estabilished business with Grameenphone. The core proposition of the CellBazaar project, customers. which was launched in May 2007, is a virtual marketplace where buyers and sellers are able to trade Notably, International Roaming customers are for the first time able to settle their IR bill or basic goods (e.g. rice, fish, motorcycle, used goods) from their mobile phones, bringing the benefits of enhance their security deposit instantly through an electronic settlement process from the information exchange, community networking and one-to-many trading to a previously unwired rural Grameenphone Centers. Grameenphone Centers or GPCs are Grameenphone's flagship sales and population. service points. It is a one-stop shop, manned by professional sales and service people, to help customers pay their mobile bills, change a subscription, buy a new connection or replace a mobile Environment & Social Welfare phone, and more, all under one roof. As an ever conscious corporate citizen, Grameenphone initiated the first ever green solution in the Bangladesh telecommunication sector when the company installed two hybrid solar powered base Furthermore, Grameenphone is the only operator providing pre-paid roaming and the service has station sites in January 2008. been expanded to quite a few other countries in Asia, Europe, and Saudi Arabia in the Middle East. Solar-powered base stations are still quite a new concept globally and has been installed in only a few The biggest and most complex challenge for the company was the re-registration of nearly 10 countries so far. The two sites, set up as a pilot project by Grameenphone, at Habiganj, have been million subscribers. The Bangladesh Telecommunication Regulatory Commission (BTRC) mandated designed to discharge power to the base stations for three consecutive days, without any sunlight to the re-registration of all mobile subscribers who had bought their connection on or before 28 recharge. This backup system not only is helping Grameenphone reduce its carbon footprint but also February, 2006. The task was successfully completed with the full cooperation of the ensuring network availability in case of any prolonged inadvertent shutdown of the national power grid. Grameenphone team! The two projects have been implemented with technical assistance from Rahimafrooz and Add Power Financial highlights respectively and have proven its business model. However, the new solar base stations that will be The total revenue of 2008 increased by 13 percent compared to 2007 to BDT 61 billion mainly due rolled out through 2009 will follow a home-grown solution. to good contribution from customers, revenues from international gateway (IGW) and interconnect revenues from Bangladesh Telecommunications Company Limited (BTCL).The company’s EBITDA Another significant project on the social development front was the Clinic-on-Wheels established by margin in 2008 reached at 49.7% compared to 50.0% in 2007, the company as part of the “Grameenphone Safe Motherhood and Infant Care” project. The clinic-on-wheels concept was a unique project and was the first of its kind deployed in the country. Grameenphone has invested over BDT 27 billion (BDT 2,700 crore) in 2008, which includes BDT 5.92 billion (BDT 592 crore) investments on acquiring an additional 7.4 MHz GSM frequency on The clinic-on-wheels provides free ante-natal care, delivery and post-natal care to the mothers, and 1800 band in the fourth quarter. These investments bring Grameenphone’s accumulated basic healthcare services to infants. The vehicles are equipped with professional staff, clinical aides and investment into Bangladesh to about BDT 140 billion (or BDT 14,000 crore) since inception to date. logistics to provide basic essential healthcare to the coastal belt communities of Bangladesh. Facilities for consultation, physical examination, a mini-pharmacy, and few basic laboratory investigation During the third quarter of 2008, the company signed agreements with ten institutions to raise services have been made available in the mobile clinics. There are also provisions for minor surgeries. BDT 4,250 million from the local capital market through issuance of coupon bearing bonds on a Each of the clinic-on-wheels cover 4-5 clinic coverage areas and the target communities are notified private placement basis. Grameenphone issued 425 unsecured and non-convertible bonds, in advance of the mobile clinic’s route plan through public service announcements. denominated at BDT 10 million each, over two tranches; the first with a 540-day term and the other a 720-day term. Among other social developments by Grameenphone, the four school-cum-cyclone shelters erected in Sidr-affected areas; the establishment of a blood bank with Grameenphone NGO partner Thengamara The bonds carried an interest rate of 14.5% per annum. While the bonds are not listed in any of the Mohila Sabuj Sangha (TMSS) in Bogra; and the cervical cancer vaccination program, under the bourses, the free transferability structure ensures that the financial instruments can be easily guidance of the Bangabandhu Sheikh Mujib Medical Hospital (BSMMU) and the technical guidance of bought and sold over the counter. the Harvard Medical School, have been the more significant social programs through 2008. It should be noted that the bonds were the first of their kind in the Bangladesh capital market. Notably Grameenphone and the bonds were both rated “AAA” by the Credit Rating Agency of Bangladesh (CRAB), which is the highest credit rating given by CRAB. Citibank N.A. Bangladesh was the Arranger and Placement Agent for the transaction. GP AR’08 10 11

10_Page Page_11 That we have been able to extend PSTN connectivity to all our nearly 21 million and growing customers is a testimony to our commitment towards our customer. Also we have been able to expand our mobile services to the three Chittagong Hill Tracts areas of Bandarban, Khagrachari and Rangamati bringing Grameenphone’s network and EDGE/GPRS coverage to almost 100 percent of the country. Not only are we the best in value for money and innovation, we have the widest network and the furthest reaching service. Grameenphone is about innovation and pushing the boundaries of communication in Bangladesh. The launch of our BlackBerry® service is such a case in point. We introduced the EDGE service across our network way back in September 2005 – years before any other operator in the country. As a result of that decision we are now one of the largest ISPs in Bangladesh – the internet and access to the information highway is no longer restricted to the urban areas. Chief Piggybacking on our EDGE network we have expanded our Community Information Centers (CIC) across over 550 locations in Bangladesh. These rural internet kiosks are providing village people access to the information and commerce that are changing the way they earn and live. Through the CIC services the urban-rural digital Executive divide is slowly narrowing and people are gaining access to using information in ways never imagined before. Just like no one could have anticipated the extent that the Village Phone had changed communication in the Officer’s rural areas, so too has the CIC been changing the rural landscape in ways that we would never have thought possible. The people of Bangladesh are very adept to use technology to better their lives. To that end, Grameenphone is exploring avenues for introducing various financial services through the mobile Message phone. One service that would prove of immediate benefit to the people of Bangladesh would be remittance 2008 was a great year for services. Remittance services over the mobile network would effectively reach locally or internationally Grameenphone, least of because remitted funds almost to the receiver’s doorstep – and that too quickly and completely hassle-free. Such 2008 was a very challenging year services would bring about total financial accountability in the rural sector without the need for much additional for the company. We have had to investment in infrastructure. face some unexpected market In fact, working towards making things easier is one of the company’s values – it is reflected in everything we conditions, that I am happy to say do. Grameenphone’s customer service is one of the best customer service points in the country. We have has left us stronger. dedicated customer service managers ready to answer queries from subscribers through our efficient call Most importantly I think despite the center, or from any one our Grameenphone Centers located at 72 convenient points in the country. We have the global recession we close the also introduced an online customer service portal – a first time for Bangladesh -through which customers can year on a up-swing. Things are solicit the help of a customer manager over a chat window 24 hours a day. looking up and we expect 2009 to In 2008 Grameenphone contributed BDT 31.72 billion (BDT 3,172 crore) to the National Exchequer in direct be a good year for Grameenphone – taxes, VAT and duties, and through the BTRC. In addition, Grameenphone paid BDT 3.35 billion (BDT 335 crore) both in terms of revenue growth, through commercial agreements with Bangladesh Railway (BR) and Bangladesh Telecommunications Company better margins, and maintenance of Limited (BTCL). a high market share – as the number 1 operator in Bangladesh. But of Grameenphone has invested over BDT 27 billion (BDT 2,700 crore) in 2008, which includes BDT 592 crore course, it is not going to be easy. investments on acquiring additional 7.4 MHz GSM frequency on 1800 band. This brings our total cumulative investment to about BDT 140 billion (BDT 14,000 crore) since inception to date. This invest has consolidated Looking back I am pleased to report that our revenue went up our position and opened up avenues for bigger investment opportunities and better services. by 13% to about BDT 6,100 crore in 2008, compared to 2007. Already we have introduced PSTN connectivity for all subscribers, including giving nearly 21 million people in Particularly we have seen an increase in our EBITDA margins the Grameenphone family the opportunity to stay close and communicate with their near and dear ones abroad over what we saw in 2007 – this can only mean that in an through Economy ISD (EISD). environment where we have been focused on tighter market conditions we are seeing increasing cost efficiency within the We have enlisted Huawei Technologies Co. Ltd. as the company’s 2nd vendor for the expansion and company. enhancement of GP’s next generation GSM core and radio network. I trust that this development will widen our scope of operations and help us introduce newer more innovative products and service. The close of 2008 saw us just short of the 21 million subscriber mark which gives us a market share of 47%. Although we have Grameenphone has close to 4700 employees working for the company full-time. In addition, almost 150,000 added 4.5 million subscribers in 2008, our subscriber growth is people are directly or indirectly benefiting from our operations as suppliers, distributors, and retailers, etc. effected by the existing high SIM tax, which limits affordability Finally I would like to reiterate that Grameenphone and its shareholders are committed to the introduction at for customers with limited incomes. This is becoming more and the Dhaka and Chittagong stock exchanges through our IPO. We have submitted out IPO application to the more a challenge for our industry. Admittedly the next market Securities and Exchange Commission (SEC) on 11th December 2008 and have subsequently made our final is the cost conscious rural customer, and, given the present submission of the prospectus, incorporating SEC’s feedback, on 28th January 2009. Grameenphone is awaiting market conditions, companies cannot continue to subsidize decision from SEC on its application at the time of printing of this Annual Report. this tax – which then is passed onto the customer, thus significantly reducing penetration rates. The future is looking up and Grameenphone is geared better than ever to overcome the challenges and make the most of it’s opportunities in the marketplace. Bangladesh will grow in telecommunications, IT and services – However, I feel that despite the increasingly price-conscious and as the largest corporate house in the country we are ready to take part in this development. market we operate in, we are still seen as the innovative company. This is because we are continuously trying to give our customers better value for their money. While we may never be the market leader in terms of lowest price, we are definitely ahead as the best communication solution. Oddvar Hesjedal CEO

16 March, 2009 GP AR’08 12 13 The Shareholders

Shareholders The shareholders of Grameenphone contribute their unique, in-depth experience in both telecommunications and development. The international shareholder brings technological and business management expertise while the local shareholder provides a presence throughout Bangladesh and a deep understanding of its economy. Both are dedicated to Bangladesh and its struggle for economic progress and have a deep commitment to Grameenphone and its mission to provide affordable telephony to the entire population of Bangladesh.

Grameen Telecom [38%]

Telenor Mobile Telenor Mobile Communications AS [62%] Communications AS owns 62% shares of Grameenphone Ltd. Telenor Mobile Communications AS Telenor AS is the leading Telecommunications Company of Norway listed on the Oslo Stock Exchange. It owns 62% shares of Grameenphone Ltd.

Telenor, a more than 150 year-old organization, has played a pioneering role in the development of cellular communications. Manual mobile telephony services were introduced in Norway in 1966, as a forerunner to the automatic NMT system, which appeared in 1981. Its digital successor, GSM, was introduced in 1993, and third generation mobile network, UMTS, was launched for commercial use in 2004.

GP AR’08 14 15

14_Page Page_15 Telenor's strong international expansion in recent years has been based on leading-edge expertise, acquired in the Norwegian and Nordic markets, which are among the most highly developed technology markets in the world. It has substantial international operations in mobile telephony, satellite operations and pay Television services. In addition to Norway and Bangladesh, Telenor owns mobile telephony companies in Sweden, Denmark, Hungary, Russia, Ukraine, Montenegro, Thailand, Malaysia, Pakistan, Serbia and India with more than 164 million mobile subscriptions worldwide as of 31st December 2008. Telenor uses the expertise it has gained in its home and international markets for the development of emerging markets like Bangladesh. Grameen Telecom owns As part of the conversion of Grameenphone from a private limited to a public limited company, Telenor Mobile Communications AS transferred 10 shares each on 31st May 2007 to its three (3) affiliate 38% shares of organizations namely Nye Telenor Mobile Communications II AS, Norway; Telenor Asia Pte. Ltd., Singapore; Grameenphone Ltd. and Nye Telenor Mobile Communications III As, Norway. Grameen Telecom (GT) Grameen Telecom, which owns 38% shares of Grameenphone Ltd., is a not-for-profit company in Bangladesh, working in close collaboration with Grameen Bank, winner of the Nobel Peace Prize in 2006 along with its founder Professor Muhammad Yunus. The internationally reputed bank for the poor has the most extensive rural banking network and expertise in microfinance. It understands the economic needs of the rural population, in particular the women from the poorest households. GT’s mandate is to provide easy access to GSM cellular services in rural Bangladesh and creating new opportunities for income generation through self-employment by providing villagers, mostly to the poor rural women with access to modern information and communication-based technologies. GT is also one of the three National distributors of Nokia brand handsets in Bangladesh and also the authorized service provider of Nokia Care network, providing after sales services to the Nokia customers. With the help of Grameen Bank, Grameen Telecom, with its field network, administers the Village Phone Program, through which Grameenphone provides its services to the fast growing rural customers. Grameen Telecom trains the operators, supplies them with handsets and handles all service-related issues. GT has been acclaimed for the innovative Village Phone Program. GT & its chairman Nobel peace prize laureate Professor Muhammad Yunus have received several awards which include: First ITU World information Society Award in 2005; Petersburg Prize for Use of the IT to improve Poor People’s Lives” in 2004; GSM Association Award for “GSM in Community Service” in 2000. As part of the conversion of Grameenphone from a private limited to a public limited company, Grameen Telecom transferred one share each on 31st May, 2007 to its two affiliate organizations namely Grameen Kalyan and Grameen Shakti.

GP AR’08 16 17 Mr. Per Erik Hylland was appointed to the Board on June 25, 2007. He currently serves as Senior Vice President, Corporate Development, of Telenor Asia. Mr. Hylland has professional experience in the banking, information technology and telecommunications industries. He joined Telenor in 1994 and since then has held several senior management positions. During the past nine years, he has lived and worked in nine countries as a Telenor representative for Central and Eastern Europe, North Africa and Asia. During the same period, Mr. Hylland acted as a director for Telenor companies in Austria, the Czech Republic, Hungary Per Erik Hylland and Slovakia. He is an information technology engineer educated in the Norwegian Ministry of Defence.

Mr. M. Shahjahan was appointed to the Board on June 26, 2006, and is also Directors' Profile chairman of our Treasury Committee. He currently serves as the General Manager and Head of the Accounts, Finance, Planning, Monitoring and Evaluation Division of Grameen Bank. Prior to joining us, he served in several executive management positions in Grameen Bank, including Chief of the Audit Department and Zonal Manager. Mr. Shajahan is a member of the Board of Directors of several Grameen peer companies that work in the fields of agriculture, welfare, renewable energy, telecommunications, venture capital financing and merchant banking. He obtained, from the University of Dhaka, a M. Shahjahan Bachelor of Commerce (Honours) in Accounting in 1976, as well as a Masters Mr. Sigve Brekke was appointed to the Board on September 1, 2008, and is also degree in Accounting in 1977 and a Masters degree in Finance in 1981. chairman of Grameenphone Board. He succeeded Mr. Arve Johansen, who served on the Board beginning from June 26, 2006. Mr. Brekke has held a number of positions in the Telenor Group. He joined Telenor Asia PTE Ltd. in 1999 as Manager of Business Development, and later became Managing Mr. Ole Bjorn Sjulstad was appointed to the Board on December 18, 2002. He Director. He served as the co-CEO of Total Access Communication PLC has been serving as Senior Vice President in Telenor, Central & Eastern (“DTAC”) from 2002 to 2005, and became the sole CEO from 2005 till European region since 2007. He joined Telenor as Vice President in 2000 at its September 1, 2008. Most recently, in July 2008, he was appointed as Head of regional headquarters in Singapore and served as Managing Director of Telenor Telenor Asia. Prior to joining Telenor, Mr. Brekke served as the Deputy Minister Asia PTE Ltd., Singapore, from 2002 to 2004. After relocation to Norway, he Sigve Brekke (State Secretary) of Defence in Norway in 1993 and was also an associate continued to serve as Senior Vice President and Director of Corporate research fellow at the John F. Kennedy School of Government, Harvard Development, Asia region, until 2007. Prior to joining Telenor, Mr. Sjulstad held University. Mr. Brekke holds a Master of Public Administration from John F. various senior management positions in telecommunications and sub-sea oil Kennedy School of Government, Harvard University. and gas engineering companies based in Norway and the U.S. He is currently Ole Bjorn Sjulstad chairman of the Board of Directors of Telenor Russia AS, Norway, as well as a member of the Board of Directors of Vimpel Communications. He has previously Mr. Dipal Chandra Barua was appointed to the Board on June 26, 2006, and is also served on the Board of Directors of UCOM, a Thai subsidiary of DTAC, and chairman of our Audit Committee. He currently serves as the Deputy Managing DiGi.com Bhd., a Malaysian subsidiary of Telenor Asia PTE Ltd. Mr. Sjulstad holds Director of Grameen Bank and the Founding Managing Director of Grameen Shakti in degrees in Mechanical Engineering and Business Administration from Bangladesh. He is one of the core builders of the Nobel Peace Prize winning Kongsberg Ingeniorhogskole, Norway, and has studied Executive Development organization Grameen Bank. One of his key achievements is developing an integrated at IMD in Switzerland. market based model to reach rural people with renewable energy technologies and implementing this model through Grameen Shakti. It is his commitment and innovation which has made Grameen Shakti an award winning organization and one of the largest fastest growing rural based renewable energy companies in the world. As a recognition, this year, Mr. Dipal received the prestigious first-ever Zayed Future Energy Dipal Chandra Prize from the Crown Prince of Abu Dhabi. In addition, he serves as a director of sixteen Barua Grameen sister organizations. Mr. Dipal has extensive experience in the fields of poverty alleviation, microcredit, rural development and people’s participation as a result of his affiliation with Grameen Bank. He started his work with Nobel Laureate Professor Muhammad Yunus from the Jobra village in Bangladesh and became an active participant in his works; he has continued working with him ever since. As a microcredit expert, he has worked with Grameen replication projects based in China, Myanmar, South Africa. Egypt and Turkey. He holds a Bachelor of Arts (Honours) and a Master of Arts in Economics from the University of Chittagong.

GP AR’08 18 19 Dear Shareholders, Your Board of Directors welcomes you to the 12th Annual General Meeting of Grameenphone Ltd. Directors’ Report and is pleased to present the Directors’ Report, together with the Audited Financial Statements of the company for the year ended December 31, 2008 and the Auditors’ Report thereon, for For The Year Ended December 31, 2008 your consideration and approval. Historic landmark in 2008- Crossed 20m subscribers Grameenphone had another successful business year in 2008 despite economic and regulatory turmoil. After 11 years of successful operations, GP crossed 20 million subscribers’ landmark. GP acquired more than 4.51 million new-subscribers during the year – representing 47% of Bangladeshi mobile market. GP’s “Stay Close” brand campaign coupled with good value propositions and expansion of the sales distribution footprint around the country, greatly contributed to attracting new subscribers. GP’s premium brand image for providing the best quality network, innovative and useful products & services, and the sincere commitment in providing customer service are the main driving forces of its success. Grameenphone has filed application for an Initial Public Offering (IPO) with the Securities and Exchange Commission (SEC) for listing of its shares in the local Stock Exchanges which is awaiting approval from the regulators. We are hopeful that GP’s inclusion in the Country’s bourses will further highlight the potential of capital markets as an important engine of economic growth and will also enable the people to share the success of the company. 2008 was a year of many Challenges! Macro economic downturn with high inflation and food price, mandatory re-registration, around 700k subscribers under forced barring for lack of registration, cash crisis and many more. Despite all these challenges, Grameenphone maintained its competitiveness and retained its leadership in the market. Political and Socio-Economic Landscape 2008 The State of Emergency prevailed in the country with restricted political activity which was lifted at the end of the year 2008. After a prolonged period of political uncertainty, the National Election took place in Dec’08 and the country went back to democracy regime again after completing almost two years of State of Emergency. In 2008, the global economy experienced a big financial turmoil, but low level of global integration shielded Bangladesh from direct impact of the beginning global crisis. The country experienced severe economic hardship due to price hike for fuel and essential commodities, and high inflation throughout the year. The cost of living increased to 9.42% with the increase in prices of essential commodities by 12.54%. This year started with a double-digit inflation rate but at the end of the year, the point-to-point inflation in Dec’08 reached at 6.03% due to decline in the commodity and fuel prices. USD-BDT exchange rate was mostly stable in 2008 but Bangladesh taka was depreciated marginally by 0.5% against US dollar. Remittance inflow increased by 25.36% to USD 8.22 billion and foreign exchange reserve rose to around USD 5.5 billion. The investment, both local and foreign posted a sharp decline due to political uncertainty and lack of business confidence.

GP AR’08 20 21 Telecommunication Industry Scenario Customer Service An economy of a country like Bangladesh largely depends on the growth of it’s telecommunication Our customers are the heart of our business. Being a customer centric organization, we sector. This sector is one of the largest infrastructure providers of the economy, which experienced continued to work on aligning ourselves closer with our customers and in making the technology milestone growth where the tele-density reached approximately 30% with 45.98 million people user friendly for them. GP has always been committed in providing high quality after-sales (including 1.34 million fixed line users) having access to telecommunication facility. Six mobile phone service to its customers. It introduced the country’s first 24-hour Call Center in 1999. In 2008, operators of the country added 10.27 million customers in 2008, posting a 30% growth. The total mobile GP implemented world class IP Based Contact solution for managing customer interactions more subscribers reached to 44.64 million at the end of 2008 as compared to 34.37 million in 2007. This effectively. In addition, there are 20 Grameenphone Centers (GPC) and 52 Grameenphone growth came primarily in the first half of the year. The mandatory registration process and prevailing Center Franchises (GPCF) – a flagship sales and service point under one roof - especially high SIM tax leading to higher start-up price, led to marginal acquisition of the new subscribers in the designed considering the needs of the subscribers. second half of the year. Operators’ marketing strategy was mainly focused on activating the unused old Continuous Investment connection through aggressive loyalty & retention campaigns. Besides, the top operators increased the The mobile telecommunications market in Bangladesh is highly competitive. Competition in the start-up price, for both prepaid & postpaid segments, in order to be able to reduce the burden of SIM tax. market is primarily based on factors such as strategy, price, network quality, products & services The operators will continue to explore untapped potential markets both in rural & urban areas of the and customer service. Grameenphone has been able to maintain its leadership position in the country with innovative products and services. Meanwhile, the number of land phone users increased to industry to deliver a quality network with more than 11,800 base stations at over 6,800 locations 1.34 million in this year. around the country covering more than 98 percent of the population. The cumulative Regulatory Environment investment reached over BDT 139 billion at the end of the year. The regulatory environment continued to remain active in 2008. The Bangladesh Telecommunication In 2008, Grameenphone made fresh investment of more than BDT 27 billion to further increase Regulatory Commission (BTRC) took an increasingly active regulatory role leading to heightened the capacity and coverage of its nationwide network and rolled out more than 800 new base supervision and regulation of the industry. BTRC issued a number of binding guidelines and licensing stations. In another capital investment initiative, new types of monopole, camouflaged base frameworks during the year. Mobile operators were made ineligible for most of the new licenses issued by stations and micro-cell sites, and solar-powered base stations were installed for the first time in BTRC including license for Interconnection Exchange (ICX), International Gateway (IGW), International the country. A total of 807 km new fiber optic cable has been deployed in 2008, increasing the Internet Gateway (IIG), Submarine Cable (SMC), Nationwide Telecommunication Transmission Network fiber optic network to 4,729 km. In addition, Grameenphone also operates another 2,014 km (NTTN), Broadband Wireless Access (BWA) and V-Sat Hub. BTRC also introduced a separate regime for fiber optic network leased from Bangladesh Railway and Power Grid Company of Bangladesh every new service e.g. Vehicle tracking, Cyber Café, Wi-Fi, Video-conferencing etc. All operators are Ltd. (PGCB). GP’s core network and radio access equipment so far has been mainly supplied by obliged to open up their existing infrastructure for compulsory sharing as directed by BTRC in Ericsson. But in 2008 GP signed a long term purchase arrangement for network and radio Infrastructure Sharing Guidelines. access equipment with Huawei. There have been some positive developments also in 2008. BTRC allocated in total additional 17.4 MHz Our Employees frequency to three mobile operators, of which Grameenphone took 7.4MHz. GP successfully deployed We believe that employees are a source of competitive advantage making the success stories! parts of this additional frequency which resulted in improvement of network service quality. The We recognize that continued and sustained improvement in the performance of GP depends on government finally lifted the embargo and allowed expansion of mobile phone networks in all three its ability to attract, motivate and retain employees of the highest caliber. The driving force districts of Chittagong Hill Tracts. During the year BTRC indicated that 3G license will be issued in 2009. behind GP’s continued success over the years has been its professionally competent and The Corporate Tax rate for mobile phone companies remained same at 45%. The Government has dedicated team of people working for the company. GP is committed to the principle of equal approved the tax rebate facility @ 10% on a part of the corporate income to be spent on Corporate and fair opportunity in employment and also put in place a number of initiatives to build a strong Social Responsibility (CSR). corporate culture. GP believes in investing in human capital and empowerment of employees and has continuously trained and developed its employees for enhancing their competencies The telecom sector is the largest private sector infrastructure provider in Bangladesh. Regulatory regime and leadership qualities. GP’s Heath Safety Security & Environment (HSSE) function is working of the country however is still passing through a transition process. The procedural safeguards of the for ensuring suitable working environment in the organization. A performance driven corporate legal and regulatory regimes are still being developed and, therefore, existing laws and regulations may culture along with ample opportunity for career growth, has made GP a preferred employer in not be applied consistently. Unpredictable tax & regulatory regime is still the key issue to sustain the the Bangladesh job market. growth of the industry. It is hoped that the new government will ensure a business friendly, stable and enabling regulatory environment for smooth digitalization of the country. Enhanced Value of Shareholders’ Investment Innovative Products & Services Grameenphone continued to increase the value of its Shareholders’ investment in spite of adverse business conditions. In 2008, revenue increased by 13% from 2007 against 27.4% As a leader in product development and non-voice services, GP continued its efforts to develop growth in subscriber base. The Earning Before Interest, Tax, Depreciation and Amortization innovative and useful new products and services to meet customer needs. We believe our innovation to (EBITDA) reached at 49.7% compared to 50.0% of 2007. Net Profit After Tax (NPAT) % however a great extent allows us to attract and retain our valuable subscribers. A number of products, recorded at 4.9% due to excessive tax burden on the industry. The Board and the Management promotional tariff offerings and innovative Value Added Services (VAS) were launched during the year are dedicated to maintain a decent growth in the coming years, ensuring continued e.g. call filtering, USSD menu browser, phone backup service etc. enhancement of value for the shareholders’ investment. In 2008, Grameenphone signed agreement with Titas Gas Transmission and Distribution Company Our Commitment to Corporate Social Responsibility (CSR) (TGTDCL) and Dhaka Electric Supply Company (DESCO) to settle their bill through Bill Pay service– an GP is committed to operating in a socially and environmentally responsible manner and innovative electronic bill payment and collection service using mobile phone technology. GP signed a structures its policies, initiatives and practices accordingly. Grameenphone, through its CSR unique partnership agreement with the Bangladesh Post Office (BPO) to enable access of the rural program, concentrated on health, education and empowerment of underprivileged segments of people to modern telecommunication solutions. GP also implemented a new distribution model in 2008, the country. Our employees share the same responsibility and actively take part in our programs which is designed to allow us greater efficiency, flexibility and speed in delivering our products to the to help the community. customers. GP AR’08 22 23 In 2008, Grameenphone introduced a number of community service initiatives, with the objective of Corporate Governance bridging the “Digital Divide”, 550 Community Information Centers (CIC) running in 441 Upazillas. In Corporate governance is ensured through a structured process that directs, controls and holds the addition, the internationally acclaimed Village Phone program is contributing to empower poor village organization accountable. The company has consistently been adopting high standards of women by providing them a good income earning opportunity. “Healthline” and “Billpay” initiatives are Corporate Governance. A detailed compliance report on Corporate Governance is annexed to this bringing services at peoples’ doorstep. Grameenphone has partnered with a number of renowned report (Annexure-I). national and international organizations with an aim to make a valuable contribution to Bangladesh’s Notable Contribution to the National Exchequer health sector, with particular emphasis on serving the disadvantaged segments of the population. Grameenphone has become one of the largest contributors to the Government Exchequer in recent Grameenphone has been a patron of sports since its inception. Grameenphone renewed its years. The collective contribution to the National Exchequer from inception up to December 2008 sponsorship with the Bangladesh Cricket Board (BCB) for another two years till 2009. GP is also the was BDT 117 billion. During 2008 alone, the company contributed BDT 35.07 billion to the National official sponsor for the GP-BCB Cricket Academy. GP entered into a partnership with Special Olympics Exchequer which is 23 percent higher than last year. The contribution is expected to grow further Bangladesh with the objective is to form a “national talent pool” of intellectually-challenged athletes, with the expansion and growth of the company in future. who will be further nurtured for the next Special Olympics in 2011. Dividend Climate Change Program The Directors are pleased to recommend a dividend @ 13 % of the paid up share capital amounting As a responsible company, GP recognizes that our operations may have potential impact on the to BDT 1,579.73 million (@BDT 0.13 per share of BDT 1.00 each) for the year 2008 for consideration environment and our aim is to progressively reduce our environmental impact. With this view in mind, and approval of the shareholders for distribution. the “Climate Change Project” was kicked off in Feb 2008. This project is a part of Telenor’s global Changes in Capital Structure and Bond Issue program to cater one of the most important strategic targets of supporting environment and reduce In 2008 the company increased its authorized share capital to BDT 40,000 million from BDT 5,399 global warming. The major targets of the project are: reduce internal energy consumption level; million with a 43:1 share split to reduce the par value of ordinary shares to BDT 1 from BDT 43. The reduce CO emission; evaluate climate business opportunity and develop renewable energy source to 2 company also issued bonus shares @ 400% of the paid up capital amounting to BDT 9,721 million i.e. establish a harmonious business friendly ecosystem. 4 bonus shares of BDT 1.00 each of every share of BDT 1.00 each held by each shareholders. Village Phone Program On November 11, 2008, GP issued 2 coupon bearing bonds with an aggregated principal amount of In rural and remote areas, where isolation and poor infrastructure services are often the norm, BDT 4,250 million to domestic investors. One tranche has a 540 days term, while the other has 720 telecommunications can play an extremely important role in enhancing social and economic days term. The bonds have an interest rate of 14.5% per annum. The proceeds from the bond offering development. GP through the Village Phone (VP) Program has been a unique initiative to provide are being used to restructure the maturity profile of GP’s existing debt by repaying GP’s existing telecommunication services in remote and rural areas all over Bangladesh. The VP Program has short term loan, and also to fund capital expenditure in the remainder of 2008 and in 2009. created an income-earning opportunity for the VP subscribers, who are mostly poor women and borrower members of Grameen Bank. The VP Program has been acknowledged as a sustainable tool Directors of the Board by development agencies such as the World Bank, The United Nations and USAID, and received Board of Directors & Board Meetings several global awards. This year, the Village Phones are converted into prepaid for more convenience The composition of the Board of Directors who held office during the year was as below: of the subscribers and by the end of 2008, there were 2, 86,000 VP subscribers providing telecommunication services in over 58,000 villages in 64 districts across the country. Besides, the 1. Mr. Sigve Brekke, Telenor Mobile Communications AS, Director & Chairman Village Phone Program has also been replicated in a number of countries including Uganda and (replaced Mr. Arve Johansen in September 2008) Rwanda in Africa. 2. Mr. Per Erik Hylland, Telenor Mobile Communications AS, Director 3. Mr. Ole Bjorn Sjulstad, Telenor Mobile Communications AS, Director Directors’ Responsibilities for Financial Statements 4. Mr. Dipal Chandra Barua, Grameen Telecom, Director The Directors confirm, to the best of their knowledge – 5. Mr. M. Shahjahan, Grameen Telecom, Director (a) that in the preparation of the annual accounts, the applicable accounting standards have been During 2008, 13 Board meetings in total were held. The attendance record of the Directors is shown followed; in Annexure-II of this report. (b) that the Directors have selected such accounting policies, and applied them consistently and Directors appointment & Re-appointment made judgments and estimates that are reasonable and prudent so as to give true and fair view of With regard to the appointment, retirement and re-appointment of Directors, the Company is the state of affairs of the Company as at December 31, 2008 and of the profit of the Company for governed by its Articles of Association, the Companies Act, 1994 and other related legislations. In that year; the forthcoming Annual General Meeting all the Directors of the board will retire and will be eligible for re-appointment, if so nominated by the shareholders. (c) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1994 for Appointment of Auditors safeguarding the assets of the Company and for preventing and detecting fraud and other As per Articles of Association, the external auditors of the Company, Rahman Rahman Huq, irregularities; Chartered Accountants, a member firm of KPMG, shall retire in this AGM and, being eligible, offered their willingness to be re-appointed for the year 2009. The Board recommends their (d) that the Directors have prepared the annual accounts on a going concern basis. re-appointment for the year 2009 till holding of the next AGM.

GP AR’08 24 25 Risks and Concern Annexure-I Our business is subject to variety of risks and uncertainties e.g. Regulatory Risks, Market Risk, Upon listing with the Stock Exchange(s), the SEC Notification No. SEC/CMRRCD/2006-158/Admin/02-08 Operation Risk, Legal Risk, Interest Rate Risk, Exchange Rate Risk, and potential changes in Global or dated 20th February, 2006 issued under section 2CC of the Securities and Exchange Ordinance, 1969 National policies etc., which are no different from any other company in general and our competitors will be applicable to Grameenphone. However, we have considered this notification for our compliance in particular. We have well defined risk management policies that act as an effective tool in mitigating to enhance Corporate Governance. The compliance status is presented below : various risks to which our businesses is exposed in the course of its day-to-day operations as well as Condition Compliance Explanation for non- Title in its strategic actions. No. Status compliance with the condition Looking into the Future 1.1 Board’s Size (number of Directors – minimum 5 and Complied Despite the international recession, we expect 2009 to be another year of continuing improvement Maximum 20) 1.2 (i) Independent Directors ( at least one tenth of Directors Complied and progress for our business, aligned with our vision of being the most trusted service provider of should be Independent Directors) telecommunication. We will bring the next generation of communications solution to the market, and 1.2 (ii) Independent Directors Appointment (should be appointed Not Complied Independent Director is yet to establish ourselves as a differentiated customer centric company. Our overall goal is to maintain and by the elected Directors) be appointed. strengthen the number 1 position amongst the other operators in Bangladesh. To win in the 1.3 Chairman & Chief Executive Officer (preferably be different) Complied marketplace, we must strengthen our brand and be smart in competition. We are confident that we 1.4 (a) Directors Report on Financial Statements (fairness of Complied will stay ahead through our innovation and operational excellence. We look forward to growing financial statements) together with our many stakeholders in 2009 and beyond. With the same spirit, the shareholders of 1.4 (b) Books of Accounts (maintenance of proper books of accounts) Complied the company are committed to share GP’s success with the people of the country by being listed in 1.4 (c) Accounting Policies (application of appropriate accounting Complied the stock exchanges. The shareholders look forward to a successful completion of the ever largest policies & estimates) 1.4 (d) IAS Applicable in Bangladesh (application & adequate Complied IPO in the country. disclosure for any departure) Appreciation 1.4 (e) System of Internal Control (efficiency of Internal Control System) Complied The members of the Board would like to place on record its appreciation for the shareholders of the 1.4 (f) Going Concern (ability to continue as a going concern) Complied company for their continued support and guidance, including each and every member of the 1.4 (g) Deviations in Operating Results (highlighting significant Complied company for the hard work and dedication in turning out a satisfactory performance in a difficult year deviations from last year in operating result) of political and economical turmoil. 1.4 (h) Key Operating and Financial Data (summarized financial Complied data of at least preceding three years) The Board also acknowledges the cooperation and guidance extended to the company by the 1.4 (i) Declaration of Dividend Complied Government of Bangladesh, Ministry of Post and Telecommunications (MOPT), Bangladesh 1.4 (j) Number of Board Meetings (no. of Board Meetings held and Complied Telecommunication Regulatory Commission (BTRC), Bangladesh Railway, National Board of Revenue attendance by each director) (NBR), Bangladesh Bank, Board of Investment (BOI), Registrar of Joint Stock Companies and Firms 1.4 (k) Pattern of Shareholding (disclosing aggregate number of Complied shares) (RJSC), Chief Controller of Export & Import, Securities and Exchange Commission (SEC), Dhaka Stock 2.1 Appointment of CFO, HIA & CS and defining their respective Complied Exchange, Chittagong Stock Exchange, Grameenphone’s bankers, vendors and other business roles, responsibilities & duties partners for the positive support and active cooperation that the company has received from them. 2.2 Board Meeting Attendance (CFO & CS should attend expect Complied The Board acknowledges with thanks the contribution of the valued customers by making agenda relating to them) 3.00 Audit Committee (should have an audit committee as a Complied Grameenphone their preferred service provider. We, the Members of the Board, as a representative of sub-committee of the Board of Directors) the shareholders assure the management and employees of the company of our continued support in 3.1 (i) Composition of Audit Committee (should be composed of at Complied strengthening the company and will continue to serve our valued customers of the company with the least three members) same zeal as demonstrated last year. Our ambition for 2009 is to keep and strengthen our position 3.1 (ii) Audit Committee Members Appointment (members should Not Complied All members are appointed as number 1 operator in Bangladesh, by winning the market place, by staying close to our customers nominate by the Board with at least one independent except the Independent and by traversing new frontiers with exciting innovations. director) Director (Ref. 1.2 (ii)) 3.1 (iii) Term of Service of Audit Committee (Board to ensure Complied Thanking you all and with best regards. continuity of minimum prescribed number of members) 3.2 (i) Chairman of Audit Committee (Board to select Chairman Complied For and on behalf of the Board of Directors of Grameenphone Ltd., from Audit Committee) 3.2 (ii) Audit Committee Chairman’s Qualification (Professional Complied qualification and experience of the Chairman) 3.3.1 (i) Reporting to the Board of Directors Audit Committee was formed in late 2008 and it will function in 2009 Sigve Brekke Chairman 3.3.1 (ii)(a) Report of Conflict of Interest Ref. 3.3.1 (i) Grameenphone Ltd. 3.3.1 (ii)(b) Defect in the Internal Control System to the Board of Ref. 3.3.1 (i) Directors Ref. 3.3.1 (i) 16 March, 2009 3.3.1 (ii)(c) Suspected Infringement of Laws to the Board of Directors 3.3.1 (ii)(d) Any other Matter (out of the above, a:c) Ref. 3.3.1 (i)

GP AR’08 26 27 Condition Compliance Explanation for non- Title No. Status compliance with the condition 3.3.2 Reporting to the Authorities – SEC (if any material impact on Ref. 3.3.1 (i) the financial condition & results of operation, unreasonably ignored by the management) 3.4 Reporting to the Shareholders (disclosure of activities of the Ref. 3.3.1 (i) Organizational audit committee in the annual report) 4.00 (i) Appraisal or Valuation Services (none by the Complied external/statutory auditor) 4.00 (ii) Financial Information System (none by the external Complied /statutory auditor) Structure 4.00 (iii) Book keeping or Other Services (none by the Complied external/statutory auditor) 4.00 (iv) Broker-dealer Services (none by the external/statutory auditor) Complied 4.00 (v) Actuarial Services (none by the external/statutory auditor) Complied 4.00 (vi) Internal Audit Services (none by the external/statutory Complied auditor) GP Organogram & Management 4.00 (vii) Any other Services (none by the external/statutory auditor) Ref. 3.3.1 (i)

Board Board of Directors Annexure II Audit Committee Board Meeting and attendance during the year ended 31 December 2008

Name of Directors Number of meetings Meetings Remarks Delwar Hossain Azad * Financial Services held whilst a Board attended Farhad F. Ahmad * Oddvar Hesjedal member Internal Audit Chief Executive Officer Shafiqul Islam * Broadband Mr. Arve Johansen 8 8 Held the office of Director till 31st August 2008 Mr. Sigve Brekke 6 6 Appointed on 1st September 2008 Mr. Per Erik Hylland 13 13 Mr. Ole Bjorn Sjulstad 13 12 Frode Stoldal Titus Dan Rubaba Dowla Arif Al Islam Raihan Shamsi Arnfinn Groven Chief Chief Chief Deputy CEO & Chief Corporate Chief Human Mr. Dipal Chandra Barua 13 13 Technology Marketing Communications Chief Finance Affairs Officer & Resources Officer Officer Officer Officer Company Officer Mr. M. Shahjahan 13 11 Secretary

* Not part of Management Team

GP AR’08 28 29 Profile of the Management Team

GP AR’08 30 31

30_Page Page_31 4. Titus Dan CMO Mr. Titus Dan was appointed as our Chief Marketing Officer, effective January 19, 2009. Prior to joining us, he was Marketing Communications Director and later Chief Commu- nications Officer for Pannon, Telenor's subsidiary in Hungary. Previously, he worked in various marketing positions in the consumer goods sector for Colgate-Palmolive and SABMiller in USA, Turkey, France, Lebanon, Hungary and Romania. He holds a Masters in Business Administration from the University of South Carolina and a Bachelors degree in Science from Babes-Bolyai University in Romania. He has also completed executive programs at Harvard Business School and London Business School. 2 7 4 1 3 6 5 5. Rubaba Dowla Ms. Rubaba Dowla was appointed as our Chief Communications Officer, effective CCO January 19, 2009. She previously held the position of Director of Marketing, in 2008. She has been working with us for more than ten years. She headed our Marketing Division in 2006, and headed our Brands and Customer Service division in 2007 as Deputy Director, Commercial Division. She also led our Market Research & Development team. She has been the architect behind the 1. Oddvar Hesjedal development of our Products and Value Added Services & Strategy Departments Mr. Oddvar Hesjedal was appointed as our Chief Executive Officer effective November in the Marketing Division. She has worked with Telenor and its affiliates on many CEO 10, 2008 after joining us as Chief Technical Officer in June 2008. He was a Senior Vice projects, and has experience in the international telecommunications industry. President of Telenor, and has held senior management positions within the Telenor She has a Masters in Business Administration from the University of Dhaka, where Group over the last 15 years. He was Chief Technical Officer and Chief Operating she majored in marketing. She has also completed an executive management Officer of Kyivstar GSM, Ukraine from 2004 to 2006, Head of Corporate Strategy of course with the Stockholm School of Economics and London Business School. Telenor AS from 2001 to 2003, Head of Corporate Research & Development of Telenor AS from 1995 to 2001 and Chief Information Officer of Telenor AS from 6. Raihan Shamsi Mr. Raihan Shamsi was appointed as our Chief Corporate Affairs Officer, effective 1993-1995. He previously headed the International Broadband Initiative within the CCAO & CS January 19, 2009. He also remains as Company Secretary, a position he has held Telenor Group, in 2005. He has been a member of numerous boards of companies since 2005. He was previously our Director of Financial Management and, before within and outside Telenor. Before joining Telenor, he was the Chief Executive Officer of that, Head of Internal Audit. Prior to joining us in late 2001, he worked in a number software and consultancy companies in Norway and Sweden. He has a Masters of multinational organizations, including Shell, Unilever and KPMG Bangladesh. degree in computer science from the University of Oslo. He is a Fellow of the Institute of Chartered Accountants of Bangladesh and has been working in financial management and internal control functions for around 2. Arif Al Islam ten years. He holds a Bachelors degree in Commerce from the University of Mr. Arif Al Islam was appointed as our Deputy Chief Executive Officer, effective January Chittagong, Bangladesh. DCEO & CFO 19, 2009, and also remains as our Chief Financial Officer, a position he has held since 2006. He has worked for us since 2000 in the areas of strategic and business 7. Arnfinn Groven planning, financial reporting, financial system implementation and business analysis. Mr. Arnfinn Groven was appointed as our Chief Human Resources Officer, effective Prior to joining us, he was a Senior Manager at Rahman Rahman Huq, a member firm CHRO January 19, 2009. He was previously Director of Customer Services. He joined us as of KPMG International, for one year and based in Bangladesh. Before that, he had over Senior Advisor in the Customer Management Division in August 2007. He started his five years of public practice experience in the United Kingdom, with a range of career in 1984 at the Work Research Institute in Oslo as a Scientific Assistant. For experience in audit, taxation and financial consultancy services. He is a Fellow of the the next 12 years, he developed his expertise in human resource management and Chartered Certified Accountants from the United Kingdom. career counseling in different reputable organizations in Norway. In 1996, he joined the Telenor Consumer Customer Service. In 2000, he became the Operational Director of Telenor Customer Service in Oslo. He is currently on secondment from 3. Frode Stoldal Telenor. He holds a degree in Psychology from the University of Oslo and an Mr. Frode Stoldal was appointed as our Chief Technology Officer, effective January 19, executive degree on the Telenor International Management Program from the CTO 2009. He joined us as Chief Information Officer in November 2007 and is on Stockholm School of Economics. secondment from Telenor. Prior to that, he was with Telenor for approximately seven years in a number of senior positions, including Project Director for Global Coordination, Strategy Adviser for Group CIO and Head of CRM solutions for Telenor Norway. Prior to joining Telenor, he worked for four years in the consulting and internet industry, for PricewaterhouseCoopers and Infostream. He holds a Masters degree in Technology Management from NTNU/Massachusetts Institute of Technology, Sloan School of Management, Boston, specializing in Business Value of IT. He also holds a Master of Science in Economics and Business Administration from the Norwegian School of Economics and Business Administration and he has a Business degree specialized in Managing Networked Businesses from Harvard Business School.

GP AR’08 32 33 Subscriber ('000) Market Share %

20,993 50.7% 47.9% 47.0% Three Years 16,483 Financial Summary 10,759 2008 2007 2006 2006 2007 2008 2006 2007 2008 Operational Results in million BDT Revenue 61,359 54,303 45,640 Revenue (Mn BDT) Operating Profit (Mn BDT) Operating Profit 15,350 16,767 18,195 Profit before tax 11,579 13,535 17,020 61,359 Income Tax expenses 8,595 10,475 9,536 54,303 18,195 16,767 Profit after tax 2,984 3,060 7,484 45,640 15,350

Financial Position in million BDT Paid-up Capital 12,152 2,430 2,430 Shareholders' equity 27,588 26,111 24,509 Total assets 108,194 88,461 66,757 2006 2007 2008 2006 2007 2008 Total liabilities 80,606 62,350 42,247 Current assest 14,430 6,851 10,442 NPAT (Mn BDT) Total Equity (Mn BDT) Current liabilities 50,231 36,445 23,568 Non current assets 93,765 81,610 56,314 27,588 24,509 26,111 Non current liabilities 30,375 25,905 18,680 7,484

Financial Ratios Current Ratio 0.29 0.19 0.44 3,060 2,984 Debt to Equity 0.68 0.63 0.32 Gross Profit Margin 48% 55% 59% 2006 2007 2008 2006 2007 2008 Operating Profit Margin 25% 31% 40% Net Profit Margin (NPAT Margin) 4.9% 5.6% 16.4% Return on Equity 11.1% 12.1% 35.0% Total Assets (Mn BDT) Investment (Mn BDT) Return on Total Assets 3.0% 3.9% 12.9% 108,194 35,763 88,461 Ordinary Shares Information 27,351 Ordinary Shares outstanding (in million) 12,152 56.51 56.51 66,757 21,656 Face Value per share 1.00 43.00 43.00 Cash Dividend on paid up capital 13% 62% 60% Dividend payout 52% 49% 19% Earning Per Share 0.25 54.14 132.41 2006 2007 2008 2006 2007 2008 Adjusted Earnings Per Share 0.25 0.25 0.62 ARPU (BDT) AMPU (Minutes)

466 309 252 329 216 262

2006 2007 2008 2006 2007 2008

GP AR’08 34 35

34_Page Page_35 Value Added Statement in million BDT 2008 % 2007 % Value Created Revenue 61,359 54,303 Other income 53 104 Value added tax 9,067 8,044 70,479 62,451

Less: Cost of network and services 27,257 24,426

43,222 100% 38,025 100%

Value Distributed Employees 3,627 8.4% 2,918 7.7% Contribution to Government 17,637 40.8% 15,290 40.2% Providers of debts 1,805 4.2% 948 2.5% Dividend to Shareholders 1,580 3.7% 1,507 4.0% 24,649 57.1% 20,663 54.4%

Value Retained Depreciation 15,144 35.0% 10,396 27.3% Retained profit 1,404 3.2% 1,553 4.1% Deferred Tax 2,025 4.7% 5,413 14.2% 18,573 42.9% 17,362 45.6% 43,222 100% 38,025 100%

Distribution of Value Added (2008) Retained profit reinvested for expansion [43%] Providers of debts [4%] Dividend to Shareholders [4%] Employees [8%] Value Added Statement Contribution to Government [41%]

Distribution of Value Added (2007) Retained profit reinvested for expansion [46%] Providers of debts [2%] Dividend to Shareholders [4%]

Employees [8%]

Contribution to Government [40%]

GP AR’08 36 37 BDT 35 billion paid to National Exchequer in 2008 The collective contribution to the National Exchequer from inception up to December 2008 was BDT 117 billion of which, BDT 35 billion was made in 2008 alone. Out of total BDT 117 billion, BDT 95 billion was made on account of direct tax, VAT and duties and through Bangladesh Telecommunication Regulatory Commission (BTRC), BDT 18 billion through commercial agreements with Bangladesh Railway (BR) and Bangladesh Telecommunications Company Limited (BTCL), and BDT 4 billion as indirect payments against withholding taxes on account of local and foreign staff salary income and operating expenditure payments. Grameenphone has been the largest corporate taxpayer in the country for the last four years Grameenphone has also generated direct and indirect employment for a large number of people over the years. The company presently has around 4700 employees while about 150,000 people are directly dependent on Grameenphone for their livelihood, working for the 35,071 dealers, retailers, electronic reload and scratch card retail outlets, suppliers, vendors, contractors and other business partners. With the payment of taxes and the investments in the network, 28,434 Grameenphone is making a significant contribution to the country’s development and growth.

18,177 Contribution to Year- wise Contribution to National Exchequer as of December 31, 2008 12,961 National Exchequer 8,240 5,839 4,018 2,076 1,133 10 469 347 591

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Withholding Taxes - 11 18 22 28 36 82 143 256 445 748 1,130 1,185 BTCL & BR - 125 182 226 504 430 1,226 1,473 1,466 2,556 2,780 4,029 3,352 BTRC 10 34 32 75 213 575 712 650 1,168 1,239 2,523 4,766 8,794 NBR(Tax, VAT, & Duties) - 298 115 268 388 1,035 1,999 3,572 5,350 8,721 12,126 18,509 21,739 Total Payment 10 469 347 591 1,133 2,076 4,018 5,839 8,240 12,961 18,177 28,434 35,071 BDT in Million * The Figures of earlier years have been re-stated to make comparable with 2008 figures.

GP AR’08 38 39

38_Page Page_39 Auditors’ Report to the shareholders of Grameenphone Ltd. We have audited the accompanying financial statements of Grameenphone Ltd. which comprises the balance sheet as at 31 December 2008 and the profit and Auditors' Report & loss account, statement of changes in equity and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes. These financial statements are the responsibility of the Audited Financial company's management. Our responsibility is to express an independent opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing Statements as applicable in Bangladesh. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements, prepared in accordance with International Financial Reporting Standards (IFRS), Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS), give a true and fair view of the state of the company’s affairs as at 31 December 2008 and of the results of its operations and its cash flow for the year then ended and comply with the Companies Act 1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations. We also report that: a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit and made due verification thereof; b) in our opinion, proper books of account as required by law have been kept by the company so far as it appeared from our examination of those books; c) the company’s balance sheet and profit and loss account dealt with by the report are in agreement with the books of account; and d) the expenditures incurred were for the purposes of the company's business.

Auditors Rahman Rahman Huq Chartered Accountants

Dhaka, 16 March, 2009

GP AR’08 40 41 Balance Sheet As at As at Profit and Loss Account as at 31 December 2008 31 Dec 2008 31 Dec 2007 for the year ended 31 December 2008 Assets Notes Taka Taka 2008 2007 Non current assets : Notes Taka Taka Property, plant and equipment, net 4 85,553,852,589 80,318,189,542 Intangible assets 5 8,193,645,543 1,275,733,440 Revenue 32 61,358,978,118 54,303,145,932 Investment in shares of X-Net Ltd. 6 4,467,968 4,467,968 Long-term receivables and deposits 7 12,658,694 11,596,466 Cost of network operations: 93,764,624,794 81,609,987,416 Direct cost of network revenue 33 (13,935,077,189) (12,792,565,946) Current assets: Network operation and maintenance expenses 34 (4,501,457,137) (2,508,157,767) Inventories 8 407,184,697 843,646,147 Depreciation and amortisation 35 (13,332,231,627) (9,122,173,137) Deferred cost of connection revenue 9 360,712,137 357,679,797 (31,768,765,953) (24,422,896,850) Accounts receivable, net 10 4,146,483,267 2,725,726,115 Gross profit 29,590,212,165 29,880,249,082 Advances, deposits and prepayments 11 2,494,777,907 2,119,366,225 Cash and cash equivalents 12 7,020,671,289 804,635,376 14,429,829,297 6,851,053,660 Other income, net 36 52,582,628 103,760,767 Total assets 108,194,454,091 88,461,041,076 Operating expenses: Equity and Liabilities: General and administrative expenses 37 (6,361,967,642) (5,147,696,933) Selling and distribution expenses 38 (5,875,351,653) (6,660,418,402) Shareholders' equity: Bad debt expense 39 (243,583,871) (135,290,267) Share capital 13 12,151,747,970 2,430,349,594 Depreciation and amortisation 35 (1,811,925,203) (1,273,650,776) Share premium 13,743,987 13,743,987 (14,292,828,369) (13,217,056,378) Capital reserve 14 14,446,452 14,446,452 Operating profit 15,349,966,424 16,766,953,471 Deposit from shareholders 15 1,882,996 1,882,996 General reserve 16 2,139,729,365 2,139,729,365 Finance costs, net 40 (1,805,249,292) (948,485,684) Retained earnings 13,266,605,231 21,510,953,768 Gain/(loss) on disposal of property, plant and equipment 41 34,126,142 (101,962,955) 27,588,156,001 26,111,106,162 Compensation to BTRC 42 (2,000,000,000) (2,184,242,956) Share of profit of X - Net Ltd. 43 - 2,591,417 Non-current liabilities: Profit before tax 11,578,843,274 13,534,853,293 Loans and borrowings, net of current portion 17 1,907,356,334 3,367,620,384 Income tax expenses 44 (8,594,976,687) (10,475,013,275) Bond obligation 18 4,216,405,145 - Profit for the year 2,983,866,587 3,059,840,018 Deposit from agents and subscribers 19 482,653,949 557,317,602 Finance lease obligations, net of current portion 20 5,046,935,826 5,315,559,235 Earnings per share Deferred tax liabilities 21 18,535,226,437 16,510,153,280 Basic earnings per share 45 0.246 0.252 Long term payables and provisions 22 164,633,966 145,694,461 Employee benefits - provision for gratuity 22,122,040 8,933,591 The annexed notes 1 to 51 form an integral part of these financial statements. 30,375,333,697 25,905,278,553

Current liabilities: Accounts payable 23 3,795,800,229 8,135,600,956 Payable to government and autonomous bodies and other operators 24 11,152,680,130 5,849,623,774 Director Director Chief Executive Officer Income tax payable 25 10,077,565,649 8,350,371,941 Unearned revenue 26 1,260,211,260 1,294,707,151 VAT payable 27 2,226,760,000 2,335,718,147 Loans and borrowings - current portion 17 1,406,260,610 1,108,679,811 Deputy Chief Executive Officer Company Secretary Finance lease obligations - current portion 20 1,160,709,556 1,485,227,318 & Chief Financial Officer Deferred connection revenue 28 474,142,173 617,220,271 Interest payable on loans and borrowings 153,997,529 197,615,312 Local interest bearing short-term borrowings 29 4,992,322,916 4,908,835,153 As per our report of same date. Provision for expenses 30 9,393,872,169 2,161,056,527 Advance against PPO 31 4,136,642,172 - 50,230,964,393 36,444,656,361 Total equity and liabilities 108,194,454,091 88,461,041,076 Auditors Rahman Rahman Huq The annexed notes 1 to 51 form an integral part of these financial statements.

Dhaka, 16 March, 2009 Director Director Chief Executive Officer

Deputy Chief Executive Officer Company Secretary & Chief Financial Officer As per our report of same date. GP AR’08 Auditors Dhaka, 16 March, 2009 Rahman Rahman Huq 42 43 Statement of Changes in Equity for the year ended 31 December 2008

Share Share Capital Deposit from Tax holiday General Retained capital premium reserve shareholders reserve reserve earnings Total Taka Taka Taka Taka Taka Taka Taka Taka Balance as at 1 January 2007 2,430,349,594 13,743,987 14,446,452 1,882,996 206,312,859 1,933,416,506 19,909,323,506 24,509,475,900 Net profit for the year 2007 ------3,059,840,018 3,059,840,018 Final dividend for the year 2006 ------(1,458,209,756) (1,458,209,756) Transfer from tax holiday reserve to general reserve - - - - (206,312,859) 206,312,859 - - Balance as at 1 January 2008 2,430,349,594 13,743,987 14,446,452 1,882,996 - 2,139,729,365 21,510,953,768 26,111,106,162 Net profit for the year 2008 ------2,983,866,587 2,983,866,587 Final dividend for the year 2007 ------(1,506,816,748) (1,506,816,748) Bonus issue in 2008 9,721,398,376 - - - - - (9,721,398,376) - Balance as at 31 December 2008 12,151,747,970 13,743,987 14,446,452 1,882,996 - 2,139,729,365 13,266,605,231 27,588,156,001

Cash Flow Statement for the year ended 31 December 2008 2008 2007 Taka Taka

Cash flows from operating activities:

Cash receipts from sales or for the performance of services 59,519,675,251 54,561,148,197

Payroll and other payments to employees (3,579,036,748) (2,551,623,847) Payments to suppliers and contractors (24,670,422,156) (24,441,719,182) Finance income received 92,672,551 140,454,372 Finance costs paid (1,925,872,470) (873,003,738) Income tax paid (4,842,709,822) (2,699,662,145) (34,925,368,645) (30,425,554,540) Net cash flow from operating activities 24,594,306,606 24,135,593,657

Cash flows from investing activities:

Payment for acquisition of property, plant and equipment (18,938,035,066) (29,904,914,019) Proceeds from sale of property, plant and equipment 76,107,923 62,813,546 Payment for acquisition of intangible assets (software & PCM) (4,415,375,410) (627,943,642) Net cash used in investing activities (23,277,302,553) (30,470,044,115)

Cash flows from financing activities:

Local interest bearing short-term borrowings 83,487,763 4,908,835,153 Proceeds from Issuance of bond 4,250,000,000 - Receipt from local syndicated loan - 2,000,000,000 Payment of long term borrowings (1,074,340,018) (957,737,839) Payment of finance lease obligation (964,871,433) (197,529,119) Payment of dividend (1,506,816,748) (1,458,209,756) Proceeds from PPO 4,111,572,296 - Net cash flow from financing activities 4,899,031,860 4,295,358,439

Net changes in cash and cash equivalents 6,216,035,913 (2,039,092,019)

Cash and cash equivalents at beginning 804,635,376 2,843,727,395 Cash and cash equivalents at closing 7,020,671,289 804,635,376

GP AR’08 44 45

44_Page Page_45 Notes to the financial statements Additionally the company has adopted BAS 25: Accounting for Investments for recognition and as at and for the year ended 31 December 2008 measurement of investments in X-Net Ltd. (see note 6). However the corresponding IAS has been superseded by IAS 39: Financial Instruments: Recognition and Measurement and IAS 40: Investment 1. Reporting entity Property. Had the investment been recognised and measured in accordance with the requirements of 1.1 Company profile IAS 39, it would have been classified as " available for sale" financial asset and would have been Grameenphone Ltd. is a public limited company incorporated in Bangladesh in 1996 under the measured at fair value. Management considers the estimated resulting difference would be Companies Act 1994 initially registered with an authorised capital of Tk 1,075,000,000 divided immaterial for these financial statements. into 25,000,000 ordinary shares of Tk 43.00 each. Subsequently the authorised capital was increased to Tk 5,399,000,000 divided into 120,000,000 ordinary shares of Tk 43.00 each and 2.2 Basis of measurement 5,213,787 preference shares of Tk 45.84 each. On 25 June 2007 Grameenphone Ltd. was The financial statements have been prepared on a going concern basis under historical cost converted into public limited company. In 2008, the authorised capital of the company was convention except for the following: increased from Tk. 5,399,000,000 divided into 120,000,000 ordinary shares of Tk 43.00 each (a) Employee benefits plan was measured based on actuarial valuation. and 5,213,787 preference shares of Tk. 45.84 each to Tk. 40,000,000,000 divided into (b) Capitalisation of the lease of Bangladesh Railway (BR) Fibre Optic Network (FON) was valued at 40,000,000,000 ordinary shares of Tk. 1.00 each. present value of minimum lease payments as fair value of such lease was not determinable. 1.2 Nature of business (c) Asset retirement obligations (ARO) were measured at present value of expected future Grameenphone Ltd. (hereinafter referred to as "GP"/"Grameenphone"/"the company") is a expenditure. telecommunication service provider in Bangladesh. The company also provides international roaming services through international roaming agreements with various mobile operators 2.3 Functional and presentation currency across different countries around the world. The financial statements are presented in Bangladesh taka (Taka/Tk/BDT) which is both functional currency and presentation currency of the company. The figures of financial statements have been The company obtained a radio system operating licence from the Ministry of Posts and rounded off to the nearest taka. Telecommunications (MOPT), Government of Bangladesh, valid for a period of 15 years commencing from 11 November 1996. The operating licence is subject to renewal upon fulfilment 2.4 Use of estimates and judgements of terms and conditions specified in the licence agreement. The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, The company launched commercial operation on 26 March 1997. liabilities, income and expenses. The estimates and associated assumptions are based on historical The company's network covers six divisional towns (Dhaka, Chittagong, Khulna, Rajshahi, Barisal experience and various other factors that are believed to be reasonable under the circumstances, the and Sylhet) and all 64 districts of the country. result of which form the basis of making judgements about the carrying values of assets and liabilities These financial statements have been authorised for issue by the board of directors on that are not readily apparent from other sources. Actual results may differ from these estimates. 16 March, 2009. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting 2. Basis of preparation estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future 2.1 Statement of compliance periods. Except as detailed below, the financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), Bangladesh Accounting Standards (BAS) In particular, information about significant areas of estimation uncertainty and critical judgements in and Bangladesh Financial Reporting Standards (BFRS), the Companies Act 1994, the Securities applying accounting policies that have the most significant effect on the amount recognised in the and Exchange Rules 1987 and other applicable laws in Bangladesh. financial statements are described in the following notes: Foreign currency exchange differences arising on foreign currency denominated loans and Note 20 : Finance lease obligation borrowings taken by the company have been capitalised and included in the carrying amount of Note 21 : Deferred tax liabilities property, plant and equipment as required under the provision of section 185, Part-I, Schedule XI Note 22 : Long term payables and provisions of the Companies Act, 1994 because the loans were used to acquire those assets. IAS/BAS 21: Note 30 : Provision for expenses The Effects of Changes in Foreign Exchange Rates, however requires that exchange losses/gains Note 32 : Revenue be recognised as expenses/ income in the relevant period. The difference of Tk 119,263,347 Note 35 : Depreciation and amortisation arising from capitalisation of foreign exchange gain in accordance with the requirements of the Note 44 : Income tax expenses Companies Act 1994, is however not considered material by management. In the following areas, the recognition and measurement principles of IFRS are significantly different from those of BAS and BFRS and the Companies Act 1994. However the estimated resulting differences would not be material for these financial statements. These immaterial differences with BAS/BFRS/Companies Act 1994 primarily result from non-application of following IFRSs in Bangladesh: IAS 32 Financial Instruments: Presentation IAS 39 Financial Instruments: Recognition and Measurement IFRS 7 Financial Instruments: Disclosure

GP AR’08 46 47

46_Page Page_47 3. Significant accounting policies (d) Capital work-in-progress Accounting policies set out below have been applied consistently to all periods presented in Capital work in progress consists of acquisition costs of network plant and machinery, capital components the financial statements. and related installation cost until the date placed in service. In case of import of components, capital work 3.1 Property, plant and equipment in progress is recognised when their shipment is confirmed by the supplier. (a) Recognition and measurement (e) Capitalisation of borrowing costs Items of property, plant and equipment, excluding freehold land, are measured at cost less Borrowing costs are capitalised as per allowed alternative treatment of IAS/BAS 23: Borrowing Costs. The accumulated depreciation and accumulated impairment losses, if any. Freehold land is company has both foreign and local long term interest bearing borrowings. Foreign lenders include IFC, measured at cost. The cost of an item of property, plant and equipment comprises its purchase ADB, Norfund, NORAD and Eksportfinans. Local borrowing is from a syndicate of local banks led by price, import duties and non-refundable taxes, after deducting trade discount and rebates, and Standard Chartered Bank. The financing arrangements were utilised for network expansion. For the any costs directly attributable to bringing the assets to the location and condition necessary purpose of IAS/BAS 23; core network and access platform equipments have been treated as qualifying for it to be capable of operating in the intended manner. Cost also includes initial estimate of assets. the costs of dismantling and removing the item and restoring the site on which it is located. The 3.2 Intangible assets costs of obligations for dismantling, removing the item and restoring the site (generally called (a) Recognition and measurement 'asset retirement obligation') are recognised and measured in accordance with IAS/BAS 37: Intangible assets are measured at cost less accumulated amortisation and accumulated impairment loss, Provisions, Contingent Liabilities and Contingent Assets. Purchased software that is integral to if any. Intangible asset is recognised when all the conditions for recognition as per IAS/BAS 38: Intangible the functionality of the related equipment is capitalised as part of that equipment. assets are met. The cost of the intangible assets comprises its purchase price, import duties and Items of property, plant and equipment which are procured in foreign currency are recorded in non-refundable taxes and any directly attributable cost of preparing the asset for its intended use. functional currency by applying the foreign exchange rate ruling at the date of the transaction. Intangible assets which are procured in foreign currency are recorded in functional currency by applying Any related exchange gain/(loss) is capitalised for compliance with the Companies Act 1994. the foreign exchange rate ruling at the date of the transaction. Any exchange gain or loss is capitalised as (b) Subsequent costs per the requirements of the Companies Act 1994. The cost of replacing or upgrading part of an item of property, plant and equipment is (b) Subsequent costs recognised in the carrying amount of the item if it is probable that the future economic benefits Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in embodied within the part will flow to the company and its cost can be measured reliably. The the specific asset to which it relates. All other expenditures are recognised in the profit and loss account carrying amount of the replaced part is derecognised. The costs of the day to day servicing of when incurred. the property, plant and equipment are recognised in the profit and loss account as incurred. (c) Amortisation (c) Depreciation Amortisation is recognised in the profit and loss account on a straight line basis over the estimated useful No depreciation is charged on land and capital work in progress. lives of intangible assets, from the date that they are available for use. The estimated useful lives are as Depreciation on other items of property, plant and equipment is provided on a straight-line follows : basis over the estimated useful lives of each item of property, plant and equipment. Leased 2008 2007 assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the entity will obtain ownership by the end of the lease term. For Operational software 3 years 3 years addition to property, plant and equipment, depreciation is charged from the date of Billing software 5 years 5 years capitalisation up to the month immediately preceding the month of disposal. Depreciation Network management software 10 years 10 years method, useful lives and residual values are reassessed at each reporting date. The estimated Licence fees for Pulse Code Modulation (PCM) 5 years 5 years useful lives for the current and comparative periods are as follows: 3.3 Inventories 2008 2007 Inventories consisting of mobile handsets, scratch cards and SIM cards are valued at lower of cost and net Building 20 years 20 years realisable value. Costs of inventories include expenditure incurred in acquiring the inventories, production Base station-Equipment 3-10 years 3-10 years or conversion costs and other costs incurred in bringing them to their existing location and condition. Cost Base station -Towers and related assets 20-30 years 20-30 years of inventories is determined by using the weighted average cost formula. Net realisable value is based on estimated selling price in the ordinary course of business less the estimated costs of completion and the Transmission equipment 5-10 years 5-10 years estimated costs necessary to make the sale. Computers 4 years 4 years Furniture and fixtures (including office equipment) 3 years 3 years Vehicles 4 years 4 years Estimated useful lives of property, plant and equipment other than installation accessories remained unchanged in 2008. In 2006, GP changed the estimated useful life of cable, cable ducts and other related installation accessories from 10 years to 30 years as per GCIM (Group Common Information Module). However, management subsequently considered that useful lives of cables and accessories needed to be reassessed and accordingly an exercise was performed in first quarter of 2008. GP Finance and Technical team reviewed the useful life and revised this from 30 years to 7 years. Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amounts and are recognised net. GP AR’08 48 49

48_Page Page_49 3.4 Accounts receivable (b) Defined benefit plan (gratuity) (a) Recognition and measurement Defined benefit plan is a retirement benefit plan under which amounts to be paid as retirement Accounts receivable consists of unpaid bills receivable from subscribers and unbilled revenue benefits are determined by reference to employees' earnings and years of service. The recognised recognised at the balance sheet date and are stated net of bad debts provision. Employees' Gratuity Fund is considered as defined benefit plan as it meets the recognition criteria. The company's obligation is to provide the agreed benefits to current and former employees as (b) Provision for doubtful debts per condition of the fund. According to the bad debt policy, 100% provision is made over the amount outstanding (after considering security deposits) from the churned subscribers. As per the policy of the company, a Present value of defined benefit obligation and the fair value of the plan assets were determined post paid subscriber is barred if his usage exceeds approved credit limit or any non payment of by professional actuary. Projected Unit Credit method is used to measure the present value of invoice. A subscriber is considered churned after three months of barring. defined benefit obligations and related current and past service cost and mutually compatible (c) Bad debts written off: actuarial assumptions about demographic and financial variables were used. The difference The above provision for doubtful debts is written off as bad debts after one year from the date of between fair value of the plan assets and present value of obligation is recognised as a liability or recognition. an asset in the balance sheet. (d) Recovery of bad debts: The rate used to discount post employment benefit obligations is determined by reference to Any recovery of previously written off bad debt is adjusted with bad debt expenses in the year of market yields at the balance sheet date on treasury bills. The expected return on plan assets is recovery. based on market expectation and is one of the components of expenses recognised in the profit and loss account. Total expenses recognised in the profit and loss account comprise of current 3.5 Leases service cost, interest cost and expected return on plan assets. (a) Finance lease (c) Short-term employee benefits Leases in terms of which the entity assumes substantially all the risks and rewards of ownership are Short-term employee benefit obligations are measured on an undiscounted basis and are classified as finance leases. Upon initial recognition the leased asset is measured at an amount expensed as the related service is provided. Provision is created for the amount of annual leave equal to the lower of its fair value and the present value of minimum lease payments. Subsequent encashment based on the latest basic salary. to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Incremental borrowing rate has been used to calculate the present value 3.8 Income tax of minimum lease payments. Income tax expense comprises current and deferred tax. Income tax expense is recognised in the (b) Operating Lease profit and loss account except to the extent that it relates to items recognised directly in equity, in All leases other than those which meet the definition of finance lease are treated as operating which case it is recognised in equity. lease and are not recognised in the balance sheet. (a) Current tax (c) Sub-lease Current tax is the expected tax payable on the taxable income for the year, using tax rates Rental income from sublease of optical fibre network is recognised as per the arrangements enacted or substantively enacted at the reporting date, and any adjustment to tax payable in provided in the relevant agreements on accrual basis. respect of previous years. The tax rate used for the income years ended 31 December 2008 and 31 December 2007 are as follows: 3.6 Impairment At each balance sheet date indications of impairment are reviewed. For this review Grameenphone Years Tax rate is considered as a single cash generating unit and both tangible and intangible assets are reviewed. Year ended 31 December 2008 45% If any such indication exists, the assets' recoverable amount will need to be estimated. As at 31 Year ended 31 December 2007 45% December 2008 the assessment of indicators of impairment reveals that impairment testing is not required for Grameenphone Ltd. (b) Deferred tax Deferred tax is recognised using the balance sheet method, providing for temporary differences 3.7 Employee benefits between the carrying amounts of assets and liabilities for financial reporting purposes and The company maintains both defined contribution plan and defined benefit plan for its eligible amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected permanent employees. The eligibility is determined according to the terms and conditions set forth to be applied to the temporary differences when they reverse, based on the laws that have been in the respective deeds as approved by the National Board of Revenue (NBR). enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are (a) Defined contribution plan (provident fund) offset if there is a legally enforceable right to offset current tax liabilities and assets, and they Defined contribution plan is a post-employment benefit plan. The recognised Employees' Provident relate to income taxes levied by the same tax authority on the same taxable entity. Fund is considered as defined contribution plan as it meets the recognition criteria specified for this A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be purpose. All permanent employees contribute 10% of their basic salary to the provident fund and available against which the deductible temporary difference can be utilised. Deferred tax assets the company also makes equal contribution. are reviewed at each reporting date and are reduced to the extent that it is no longer probable The company recognises contribution to defined contribution plan as an expense when an that the related tax benefit will be realised. employee has rendered services in exchange for such contribution. The legal and constructive obligation is limited to the amount it agrees to contribute to the fund.

GP AR’08 50 51

50_Page Page_51 3.9 Loans and borrowings Principal amounts of the loans and borrowings are stated at their outstanding amount. Borrowings repayable after twelve months from the balance sheet date are classified as non-current liabilities whereas the portion of borrowings repayable within twelve months from the balance sheet date, unpaid interest and other charges are classified as current liabilities. 3.10 Provisions A provision is recognised in the balance sheet when the company has a legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provision is ordinarily measured at the best estimate of the expenditure required to settle the present obligation at the balance sheet date. Where the effect of time value of money is material, the amount of provision is measured at the present value of the expenditures expected to be required to settle the obligation. (a) Asset retirement obligation (ARO) Asset retirement obligation (ARO) is recognised when there is a legal or constructive obligation for dismantling and removing an item of property, plant and equipment and restoring the site on which the item is located. The company recognises ARO in respect of roof-top Base Transceiver Station (BTS) and office space based on the present value of expected expenditures required to settle the obligation. 3.11 Revenue recognition Revenues are measured at fair value of the consideration received or receivable, net of discount and sales related taxes (VAT). Revenues are reported gross with separate recording of expenses to vendors of products or services. However, when Grameenphone Ltd. only acts as an agent or broker on behalf of suppliers of products or services, revenues are reported on a net basis. Revenues of Grameenphone comprise: (i) Rendering of services: traffic fees, subscription and connection fees, interconnection fees, various customer support revenues and other value added service revenues. (ii) Sale of goods: mobile handsets (a) Traffic revenue -Post-paid Post-paid revenue is recognised on accrual basis and recorded as income (exclusive of VAT) as services are rendered. (b) Traffic revenue -Prepaid Prepaid revenue is recognised (exclusive of VAT) as per the usage recorded in the network from the prepaid cards and electronic recharge system (ERS). The unused portion of the prepaid cards and ERS remains as unearned revenue (exclusive of VAT) and is reported as liability. (c) Subscription revenue Subscription revenue represents fixed line rent charged to post-paid customers. It is billed in advance and recognised evenly over the subscription period. (d) Connection revenue Connection revenue represents the revenue arising from sale of connection to the subscribers through new SIM which is recognised over the estimated period of customer relationship. The estimated period of customer relationship is based on past history of churn and expected development. Expected development reflects the recent development in customer churn in the industry as well as in other group entities.

GP AR’08 52 53

52_Page Page_53 (e) Roaming revenue

1 a 7 3 5 5 5 4 8 8 2 6 6 k 0 2 5 7 8 8 8 8 4 2 9 International roaming revenue is recognised on accrual basis as services are rendered. 6 1 a 8 7 , 2 4 4 5 , 8 4 9 , 3 0 , , , , , , , , , T 7 1 5 9 4 3 2 2 9 2 6 5 3 1 9 9 4 5 4 4 5 8 6 6 1 9 , 9 1 5 , 5 , 0 , , 0 0 2 (f) Interconnection revenue 7 , 8 , , , , , , 2 1 4 8 9 0 1 1 2 3 8 8 8 3 1 9

1 9 9 8 As at 9 9 0 8 8 2007 3

, 6 ,

Interconnection revenue from other operators are recognised when GP subscribers receive calls 3 6 4

3 3 , 4 6 , , , 8 , 6 , 0

1 7

7 3 6 6 5 8

5

1

from other operators' subscribers. From August 2008 onwards, interconnection revenue is being 31 December

1 3 5 5 4 a 8 2 2 9 0 4 4 1

recognised based on data provided by interconnection exchange (ICX) and international gateways 7 2 k 2 4 2 6 0 8 9 0 0 8 7 , 8 , 3 a 8 5 9 9 9 9 , , 3 3 , , , , , , , , 1 3 8 T Carrying amount 5 5 5 2 4 2 6 7 (IGW). 0 0 7 9 1 5 4 1 5 9 0 6 , 6 0 0 6 7 , 7 2 , 3 8 1 1 , , , 9 9 4 , , , , , , 7 9 5 2 3 0 2 2 9 6 7 8 5 2 3 9 3 5 2 0 0 9 0 (g) Other operating revenue As at 6 , 3 2008 2 , 6 , 0 5 4 4 , 8 , 9 3 1 1 4 , , , 7 5 8 6 6 1 0

Other operating revenue comprises customers support revenue, VAS, SMS, MMS and other revenue 8 6 from content providers and is recognised in the same manner as corresponding prepaid traffic 31 December

1

7 5 a 8

9 0 0 0 0 0 9 3 - - 7 5 k 3 4 2

3 2 2 5 1 7 0 7 , a , 6 9 ,

revenue and post-paid traffic revenue recognition policy. , , , , 9 0 0 , , , 5 3 7 T 5 8 4 4 1 7 7 4 3 2 7 5 3 4 0 4 0 0 2 , 3 2 7 8 , , 4 , , , , 4 6 6 2 , 7 , , 9

(h) Village pay phone 3 9 6 8 6 7 7 8 4 3 As at 4 2008 5 5 5 4 4 6 5 6 4 , , 4 , 7 , , 7 5 5 1 ,

Village pay phone is a prepaid service. Revenue from village pay phone was included in post-paid 7 , , 1 8 1 1 9

9 2 3 31 December revenues until February 2008. Thereafter it has been included in prepaid revenue following migration 3

) ) ) ) ) ) )

a

3 3 8 9 6 0 0 - - - - - of VPP subscribers from post-paid to prepaid. Prepaid revenue-VPP is recognised (exclusive of VAT) k

7 7 9 9 5 4 4 a 1 1 , 5 , 2 0 0 9 , , , , T , 1 5 4 6 6 6 8 as per the usage recorded in the network from the prepaid cards and electronic recharge system 4 8 3 3 3 0 6 6 6 , 8 , 8 8 , 3 3 , , , , 3 3 7 1 (ERS). The unused portion of the prepaid cards and ERS remains as unearned revenue (exclusive of ( ( 4 4

8 1

3 during ( 3 ( 9 9

the year

( ( (

VAT) and is reported as liability. Disposals

a

0 0 7 3 3 5 4 4 8 2 - - k 6 6 4

4 4 8 6 9 6 0 a 5 5 2 4 4 Depreciation 3 5 4 8 , , 0 , , , , , , , (i) Other non mobile revenue , T 7 7 2 2 6 5 2 4 6 2 4 4 7 7 3 7 2 3 2 5 4 4 6 6 , , 9 9 9 9

Other non mobile revenue represents revenue earned from various services like sale of handset, 6 , , 0 , , , , , , 7 7 1 1 7 7

7 6 6 2 6 6 3 5 5 year 7 3 2 1 9 3 3

channel fees and bill payment services. Revenue is recognised when service is rendered. 3 3 , , 7

4 3 6 ,

,

4 4 Charged 9 3 1 1

3.12 Deferred connection revenue during the

7 3 3 4 a 8 2

6 6 7 7 1 - - 5 k 6 6 2 7 7 6 9 0

3 , a 8 4 4 3 5 5 8

Deferred connection revenue represents the portion of connection revenue which is deferred over 8 2 1 , , , , , , , , , T 3 3 3 3 8 4 4 3 6 4 1 3 3 4 3 3 0 6 0 6 , 9 8 8

the remaining period of estimated customer relationship. 7 3 9 9 7 , , , 3 , , 6 , , , , 3 7 7 5 5 2 9 9 2 1 0 As at 2 3 2008 8 8 7 8 8 4 0 1 1 , 0 4 4 2 , , , , , 1 , 8 1 January 1 1 ,

3.13 Deferred cost of connection revenue 1

5 5 5 7 1 Deferred cost of connection revenue represents the costs directly related to the acquisition of 2 2

1 4 a 4 8 8 8 2 6 9 9 4 4 1 1 0 7 3 7 k 8 2 4 5 2 2 7 8 5 7 5 , , , 8 a 5 9 0 , 9 subscribers. Connection costs in excess of connection revenue is charged as expenses when , 3 3 , , , , , , , 7 8 8 T 5 7 9 0 5 1 8 7 7 0 7 1 9 1 9 9 , 3 1 7 0 9 0 0 , 0 2 1

incurred. Connection costs up to connection revenue are deferred and amortised over the period of 4 , , 7 , 6 8 3 7 7 , 6 , , 4 , , , , 1 7 5 2 7 9 2 9 6 9 9 1 9 0 3 7 1 , 5 3 As at 3 2 4 4 0 2008 1 8 5 , , estimated customer relationship. 9 8 7 , , , 8 9 9 2 0 5 4 , , 8 , 2 1 5 2 7 7 8 2

2 1 31 December

) ) ) ) ) ) ) ) )

3.14 Events after the balance sheet date a

1 7 3 3 3 5 4 8 9 - - - k 1 6

3 4 4 2 2 2 4 a 1 1 3 9 , , , 3 0 5 , 4 9 , ,

Events after the balance sheet date that provide additional information about the company's , , , T 3 6 6 1 5 3 7 2 4 1 1 0 2 1 2 6 9 9 4 6 8 , 4 6 9 , , 0 position at the balance sheet date or those that indicate the going concern assumption is not 8 , , , 4 , ,

1 , 4 4 1 7

5 8 7 4 ( 5 ( 9

(

4 0 ( 4 2

year 5 ( 1 ( 7

appropriate are reflected in the financial statements. Events after the balance sheet date that are

( , 5 , 8 Disposal/ 1 8 during the ( 1 not adjusting events are disclosed in the notes when material. Adjustment ( Cost

7 3 a 4 8 2 2

9 6 0 6 3.15 Foreign currency transactions 0 - 8 5 k 6 8 5 6 6 6 0

7 2 5 9 a 4 9 9 2 2 8 6 , , 9 , , 5 , , , , , , , T 5 5 3 9 8 8 Transactions in foreign currencies are recorded in the books at the rate of exchange prevailing on 0 0 6 8 9 5 1 9 8 0 6 3 3 6 8 5 1 7

4 7 7 7 , 3 , 4 3 3 , , , , , , 4 , , , 1 1 7 6

the date of the transaction. Monetary assets and liabilities in foreign currencies at the balance 3 5 0 5 6 6 1 7 7 6 9 1

2 5 6 6 5 3 3 2 1 1 7 ,

during , , 7 4 4 , 2 , the year Addition 8 3

sheet date are translated into Bangladesh taka at the rate of exchange prevailing at the balance 4 inance leases 8 1 9 3 1 1

sheet date. All exchange differences are recognised in the profit and loss account except for the 7 3 3 5 5 4 a 9 6 9 8 2 2 2 5 2 4 k 3 0 4 0 6 3 6 6 7 3 7 a 6 5 , 3 6 , 7 0 , 9 , , , , , , , 0 0

exchange differences arising on foreign currency denominated loans and borrowings that have been , , T 9 4 0 2 8 3 2 5 0 8 7 7 1 1 3 4 9 7 5 2 9 6 7 7 5 8 5 3 7 6 , , 2 , , 3 0 4 , , 9 9

used for the acquisition of property, plant and equipment, which have been included in the costs of , , , , , , 1 4 4 3 7 1 0 3 1 4 7 7 9 9 6 2 8 As at 8 0 7 7 0 2008 5 3 5 0 , 7 8 9 5 5 4 4 the relevant item of property, plant and equipment as per requirements of the Companies Act 1994. , , 4 8 , , , , 2 , , 1 1 January 0 7 7 3 2 5

5 2 7 0 0 1 1 capitalised under f etwork

roperty, plant and equipment roperty, plant and equipment Land Building Base station Transmission equipment Computers Furniture and fixtures (including office equipment) Vehicles Capital work in progress (Note 4.2) Fibre Optic N Name of assets 4.1 P 4. P GP AR’08 54 55

54_Page Page_55 4.2 Capital work in progress 4.7 Change in estimates This represents primarily the cost of corporate headquarters and network equipments under Useful lives of property, plant and equipment other than installation accessories remained unchanged installation/construction. The components of network equipments are procured mostly from in 2008. In 2006, GP changed the estimated useful life of cable, cable ducts and other related Ericsson, Siemens and Huawei. installation accessories from 10 years to 30 years as per GCIM. Management reassessed the useful 4.2.1 Capital work in progress - transferred life of cables and accessories in the first quarter of 2008 and changed this from 30 years to 7 years. The work in progress completed and transferred during the year to the corresponding items of The effect of this change in useful life on the financial statements is summarised below: property, plant and equipment was as follows: 2011 2010 2009 2008 Name of assets As at As at Taka Taka Taka Taka 31 Dec 2008 31 Dec 2007 Increase in depreciation (951,730,992) (951,730,992) (951,730,992) (951,730,992) Taka Taka Decrease in income tax expense 428,278,946 428,278,946 428,278,946 428,278,946 Land 6,459,520 37,837,872 Decrease in profit (523,452,046) (523,452,046) (523,452,046) (523,452,046) Base station 12,922,106,954 23,341,920,814 Transmission equipment 4,797,755,554 11,027,142,170 Decrease in property, Computers 465,403,988 1,087,056,424 plant and equipment, net (951,730,992) (951,730,992) (951,730,992) (951,730,992) Furniture and fixtures 251,397,708 807,011,806 Decrease in deferred tax liability 428,278,946 428,278,946 428,278,946 428,278,946 Vehicles 116,368,800 157,408,356 Decrease in equity (523,452,046) (523,452,046) (523,452,046) (523,452,046) 18,559,492,524 36,458,377,442 Write downs of capital inventory - 88,963,210 5. Intangible assets 18,559,492,524 36,547,340,652 Cost Amortisation Carrying amount As at Addition Disposal/ As at As at Charged Disposals As at As at As at 4.2.2 Capital work in progress - components Name of assets 1 January during Adjustment 31 ecember 1 January during the during the 31 December 31 December 31 December Capital work in progress consists of capital inventory of Tk. 1,314,925,691 and work-in-progress for 2008 the year during the year 2008 2008 year year 2008 2008 2007 corporate headquarters (CHQ) of Tk. 1,282,988,446 (2007: Tk147,231,058). Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Pulse Code Modulation (PCM) 63,730,000 800,000 - 64,530,000 34,308,184 9,216,157 - 43,524,341 21,005,659 29,421,816 4.3 Capitalisation of exchange loss/(gain) fluctuation on long term debt Software and others 2,136,101,589 1,820,550,313 (186,000) 3,956,465,902 1,291,864,478 711,779,695 (176,727) 2,003,467,446 1,952,998,456 844,237,111 In accordance with the provision of section 185 and Part -1 of schedule XI of the Companies Act Telecom License - 5,920,000,000 - 5,920,000,000 - 55,713,418 - 55,713,418 5,864,286,582 - 1994, the effect of exchange (gain) / loss on foreign currency denominated loans taken by the 2,199,831,589 7,741,350,313 (186,000) 9,940,995,902 1,326,172,662 776,709,270 (176,727) 2,102,705,205 7,838,290,697 873,658,927 company has been capitalized and included in the carrying amount of the property, plant and Intangible capital in process 402,074,513 7,694,630,646 (7,741,350,313) 355,354,846 - - - - 355,354,846 402,074,513 equipment. Exchange (gain)/ loss of (Tk. 119,263,347) and Tk. 65,761,788 were capitalized in the 2,601,906,102 15,435,980,959 (7,741,536,313) 10,296,350,748 1,326,172,662 776,709,270 (176,727) 2,102,705,205 8,193,645,543 1,275,733,440 year ended 31 December 2008 and 2007 respectively. Had the exchange fluctuation (gain)/loss been recognised as income/expenses in the relevant year, profit for the year would have been 5.1 Software increased by Tk. 119,263,347 in 2008 and would have been reduced by Tk. 65,736,050 in 2007. Software includes business software and network management software. Business software includes 4.4 Depreciation for the period charged to mainly billing software, budgeting software, oracle financial software and other business software. Year ended Year ended Network management software represents PPS, Pasolink, minilink etc. 31 Dec 2008 31 Dec 2007 5.2 Pulse Code Modulation (PCM) Taka Taka This represents licence fee for new channels with BTCL (formerly Bangladesh Telegraph and Cost of network operation 13,186,081,885 9,101,623,190 Telephone Board - BTTB). Operating expenses 1,181,365,675 911,554,550 5.3 Telecom Licence (Spectrum) 14,367,447,560 10,013,177,740 Additional 7.4 MHz Spectrum licence @ BDT 800 million per MHz was acquired from BTRC in September 2008 for subsequent 18 years. 4.5 Land represents freehold land acquired for office premises and base stations. 5.4 Intangible capital in process (CIP) 4.6 Security Intangible CIP includes software under testing phase awaiting user's acceptance. Assets with a carrying amount of Tk 7,247,720,000 are subject to a mortgage registered with the 5.5 Amortisation during the year charged to: Registrar of Joint Stock Companies (RJSC) against the loans and borrowings obtained from senior lenders. For the year ended For the year ended 31 Dec 2008 31 Dec 2007 Taka Taka Cost of network operation 146,149,742 20,549,947 Operating expenses 630,559,528 362,096,226 776,709,270 382,646,173

GP AR’08 56 57 6 Investment in shares of X - Net Ltd. As per the requirements of BAS 28: Investments in Associates, investment in X-Net Ltd. was accounted for under the "Equity Method” as long as Grameenphone had 'significant influence' over the investee. In 2007, management of Grameenphone Ltd. concluded that they had ceased to have significant influence over X-Net Ltd. As per BAS 28 (Para 18-19), when any investor ceases to have significant influence over the investee, such investment shall no longer be accounted for under the ‘Equity Method’; Investment in X-Net Ltd. has since been accounted for under the "Cost Method" as per the requirement of BAS 25: Accounting for Investments. On 21 October, 2008 Grameenphone signed a Memorandum of Understanding with X-Net Ltd. whereby it was agreed that Grameenphone would sell its investment in share of X-Net Ltd. 7 Long-term receivables and deposits As at As at 31 Dec 2008 31 Dec 2007 Taka Taka Receivable from X-Net Ltd. 2,226,000 2,226,000 Long term deposits (Note 7.1) 10,432,694 9,370,466 12,658,694 11,596,466

7.1 Long term deposits Long-term deposit account is maintained with Southeast Bank as lien against bank guarantee provided in favour of Ministry of Posts and Telecommunications, Government of Bangladesh and Bangladesh Railway for telecom licence and lease of optical fibre network respectively. This amount is refundable upon cancellation of guarantee. 8 Inventories Handsets 13,469,924 52,753,143 SIM cards 353,171,527 528,663,602 Scratch cards 40,543,246 262,229,402 407,184,697 843,646,147 Number of inventory Handsets 2,058 4,161 SIM cards (Note 8.1) 5,953,591 6,519,420 Scratch cards 33,104,923 68,437,873 8.1 SIM cards As at 31 December 2008 GP had 5,953,591 SIM cards. Out of 5,953,591 SIM cards 588,030 SIM cards were ready to be offered as new connection to subscribers. Each new connection requires Tk 800 to be paid to Govt. exchequer as Value Added Tax and Supplementary Duty. 9 Deferred cost of connection revenue Opening balance 357,679,797 446,017,752 Addition during the year 208,730,620 96,397,612 566,410,417 542,415,364 Amortisation during the year (205,698,280) (184,735,567) 360,712,137 357,679,797

GP AR’08 58 59

58_Page Page_59 10 Accounts receivable, net 10.6 Ageing schedule - Accounts receivable As at As at As at As at 31 Dec 2008 31 Dec 2007 31 Dec 2008 31 Dec 2007 Taka Taka Taka Taka The ageing schedule of accounts receivable is stated as follows: Receivables for mobile revenue(Note 10.1) 4,124,188,630 2,710,029,239 Receivables for sub lease of optical fibre network (Note 10.2) 19,635,161 15,170,151 Less than 30 days 3,175,657,107 1,650,657,213 PDB bills pay receivable (Note 10.3) 2,659,476 526,725 Later than 30 days but less than 60 days 335,651,197 269,490,542 4,146,483,267 2,725,726,115 Later than 60 days but less than 90 days 435,672,315 269,928,431 Later than 90 days but less than 180 days 149,763,633 426,573,073 10.1 Receivables for mobile revenue Later than 180 days but less than 365 days 114,343,402 171,464,778 Later than 365 days Accounts receivable 4,377,494,817 2,855,864,315 195,926,358 86,255,864 Provision for doubtful debts (253,306,187) (145,835,076) 4,407,014,012 2,874,369,901 4,124,188,630 2,710,029,239 11 Advances, deposits and prepayments 10.2 Receivables for sub lease of optical fibre network Advances : Opening balance 15,170,151 24,838,405 Advance to employees (Note 11.1) 22,962,673 24,861,285 Addition during the year 76,500,435 192,825,401 Advance to Bangladesh Railway 3,076,096 2,705,743 91,670,586 217,663,806 Other advances 551,858 - Receipt/adjustment during the year (64,810,867) (199,684,945) Advance for capital expenditure (Note 11.2) 608,512,929 824,204,919 26,859,719 17,978,861 635,103,556 851,771,947 Provision for doubtful debt (7,224,558) (2,808,710) Deposits: Receivable for sub lease 19,635,161 15,170,151 Deposit for Bank guarantee 94,178,334 1,440,533 This represents amount receivable from several parties against sub-lease of optical fibre network. Security deposits for utilities and services 55,384,258 35,380,290 10.3 PDB bills pay receivable 149,562,592 36,820,823 Grameenphone (GP) and Power Development Board (PDB) jointly launched a unique service for Prepayment and other receivables: PDB customers in the port city of Chittagong to pay their bills electronically at GP authorised bill Prepayment against rent (Note 11.3) pay centres. As per agreement, the applicable rate charged by GP in 2008 is Tk 8 against 311,951,875 335,519,870 Prepayment against PCM rent to BTCL payment of each electricity bill. 4,707,006 12,081,193 Prepayment against expenses (Note 11.4) 652,058,122 359,351,779 10.4 Provision for doubtful debts Receivables from Ericsson 509,092,652 445,549,984 Opening balance 148,643,786 41,641,457 Other receivables (Note 11.5) 232,302,104 78,270,629 Net provision made during the year 260,530,745 148,643,786 1,710,111,759 1,230,773,455 Written off during the year (148,643,786) (41,641,457) 2,494,777,907 2,119,366,225 Closing balance 260,530,745 148,643,786 11.1 Advance to employees relates to travel, training, procurement of land and payment of pre-registration cost of land, advance payment of bonus, electricity bills and other office running 10.5 Accounts receivable-security, related parties etc. expenses etc. Good and secured 2,691,392,304 1,267,702,973 11.2 Advance for capital expenditure represents partial payment to the vendors against running bills for Good and having no security other than personal security 1,455,090,963 1,458,023,142 civil works and towers of various sites and also for Corporate Headquarters of Grameenphone Ltd. Doubtful and bad 260,530,745 148,643,786 11.3 Prepayment against rent represents advance payment of rent for base station locations and office Gross accounts receivable 4,407,014,012 2,874,369,901 buildings of head office and other regional offices. Less: Provision for bad and doubtful debts (260,530,745) (148,643,786) Net accounts receivable 4,146,483,267 2,725,726,115 11.4 Prepayment against expenses represents advance payment of insurance premium, BTRC licence fee and BTCL levy and frequency charges. As at 31 December 2008, Grameenphone Ltd. had no receivable from: 11.5 Other receivables include discounts receivable on marine insurance contracts, reimbursable cost (a) the directors and other officers of the company; on customs clearing and forwarding charges, accrued interest on STD accounts and reimbursable expenditure incurred on behalf of Telenor made by Grameenphone as well as other inter-company (b) firms or private limited companies respectively in which any director of Grameenphone Ltd. is a receivables. partner, director or member, other than the receivable from Grameen Telecom as disclosed in note 47; and (c) companies under the same management.

GP AR’08 60 61 11.6 Security deposit, advance to employees and related parties etc 12.1 Collection account with other banks As at As at This represents the amount which was in transit at the balance sheet date. 31 Dec 2008 31 Dec 2007 12.2 Cash and cash equivalents include Tk. 4,111,572,296 received for Private Placement Offering (PPO) Taka Taka purpose which is deposited with Citibank, N.A. Good and secured 608,512,929 826,910,662 Good and having no security other than personal security 26,590,627 24,861,285 13 Share capital Doubtful and bad - - As at As at Total advance deposits and prepayments 635,103,556 851,771,947 31 Dec 2008 31 Dec 2007 Provision for bad and doubtful amount - - Taka Taka Advance deposits and prepayments, net 635,103,556 851,771,947 Authorized: 40,000,000,000 ordinary shares of Tk. 1 each 40,000,000,000 - As at 31 December 2008, Grameenphone Ltd. had Tk 22,962,673 (2007: Tk 24,861,285) as 120,000,000 ordinary shares of Tk. 43 each - 5,160,000,000 advance to the employees. Other than those, Grameenphone Ltd. had no loans or advances to: 5,213,787 preference shares of Tk. 45.84 each - 239,000,000 40,000,000,000 5,399,000,000 a) Directors of the company; b) Firms or private limited companies respectively in which any director of Grameenphone Ltd. is Issued, subscribed, called up and paid-up : a partner, director or member; and 12,151,747,970 ordinary shares of Tk. 1 each 12,151,747,970 - c) Companies under the same management. 56,519,758 ordinary shares of Tk. 43 each - 2,430,349,594 12,151,747,970 2,430,349,594

12 Cash and cash equivalents Shareholding position of the company at the year end was as follows: Cash in hand 14,769,868 36,944,201 Number of Cash at bank : shares Southeast Bank Limited 27,557,747 13,751,580 Ordinary shares: Standard Chartered Bank 102,164,966 20,041,085 Telenor Mobile Communications AS, Norway 7,534,077,085 7,534,077,085 1,506,815,417 Sonali Bank Limited 3,779,134 20,790,132 Nye Telenor Mobile Communications II AS, Norway 2,150 2,150 430 IFIC Bank Limited 9,076,206 1,271,315 Nye Telenor Mobile Communications III AS, Norway 2,150 2,150 430 Commercial Bank of Ceylon Limited 119,234 460 Telenor Asia Pte Ltd, Singapore 2,150 2,150 430 EXIM Bank Limited 3,344,949 1,016,137 Grameen Telecom, Bangladesh 4,617,664,005 4,617,664,005 923,532,801 Citibank, N.A. 4,961,409,614 533,768,147 Grameen Kalyan, Bangladesh 215 215 43 Dhaka Bank Limited 4,928,430 1,136,658 Grameen Shakti, Bangladesh 215 215 43 Islami Bank Bangladesh Limited 9,854,040 15,899,437 12,151,747,970 12,151,747,970 2,430,349,594 One Bank Limited 85,768,106 24,088,036 HSBC 103,227,354 45,130 Prime Bank Limited 14,773,015 18,729,676 Dutch Bangla Bank Limited 61,886,730 16,490,570 During 2008, the authorised share capital of the company has been increased from Eastern Bank Limited 1,548,576,315 71,870,150 Tk. 5,399,000,000 divided into 120,000,000 ordinary shares of Tk. 43.00 each and 5,213,787 National Bank Limited 7,593,705 4,159,249 preference shares of Tk. 45.84 each to Tk. 40,000,000,000 divided into 40,000,000,000 ordinary BRAC Bank Limited 5,136,705 2,519,643 shares of Tk. 1.00 each. The City Bank Limited 11,056,277 3,042,672 At the 16th EGM (Extra-ordinary general meeting) held on 15 July 2008, GP issued bonus shares Trust Bank Limited 4,985,109 582,558 @ 400% of the paid-up capital amounting to BDT 9,721,398,376 i.e. four bonus shares of Tk. 1.00 Bank Asia Limited 4,591,882 348,612 each for every share of Tk. 1.00 each held by each shareholder. Paid-up capital before this issue of Mercantile Bank Limited 4,339,289 576,707 bonus share was Tk. 2,430,349,594. United Commercial Bank Ltd. 3,852,439 633,911 Jamuna Bank Limited 2,633,385 452,358 Agrani Bank Limited 1,531,474 743,658 Shahjalal Islami Bank Ltd. 2,202,012 637,741 PDB Bill Collection A/C with Citibank, N.A. 15,387,015 6,996,653 Collection account with other banks (Note 12.1) 6,126,289 8,098,900 7,005,901,421 767,691,175 7,020,671,289 804,635,376

GP AR’08 62 63 14 Capital reserve 17.3 Loan from Norwegian Agency For Development Cooperation (NORAD) In 2004, the holders of preference shares converted their preference shares to ordinary shares as Grameenphone Ltd. entered into an agreement with Norwegian Agency for Development per clauses 41 to 44 of Memorandum and Articles of Association. Preference shares of Tk 45.84 Cooperation (NORAD) to obtain loan of NOK 50 million and to obtain guarantee in its favour to each were converted into ordinary shares of Tk 43.00 each and the balance Tk 2.84 per share borrow another NOK 25 million from Eksportfinans. According to the terms of the contract, interest was transferred to capital reserve account. This amount is not distributable as dividend as per the at 3.4% per annum is to be paid on drawdown amount. The interest is payable semi-annually in Companies Act 1994. arrears with the first payment to be made from 6 months after the first drawdown date which will be 15 Deposit from shareholders repayable in 14 instalments with the first instalment falling due from 42 months after the last As at As at drawdown date. GP received the loan in two instalments; one on 30 December 1997 (NOK 35 31 Dec 2008 31 Dec 2007 million) and another on 3 January 2001(NOK 15 million). Taka Taka 17.4 Local syndicated loan Grameenphone Ltd. signed a Tk 2,000,000,000 syndicated loan agreement with 16 local financial Telenor Mobile Communications AS, Norway 1,882,968 1,882,968 institutions. Standard Chartered Bank was the lead arranger for the syndicated loan. The loan is Grameen Telecom, Bangladesh 28 28 being financed by Agrani Bank, Bank Asia, Citibank N.A., IDCOL, IFIC Bank, Jamuna Bank, National 1,882,996 1,882,996 Bank, Pubali Bank, SABINCO, Sonali Bank, Standard Bank, Standard Chartered Bank, Trust Bank, The City Bank, United Commercial Bank and Uttara Bank. The loan agreement was signed on 17 Deposit from shareholders represents balance of the share money remittance which has not been September 2007. The loan bears interest at 13.50% per annum, which is calculated on the amount used for issuance of share capital. outstanding on a daily outstanding amount basis and payable at the end of each quarter. The 16 General reserve repayment will start on 15 November 2008. The first drawdown has been effected on 8 October This reserve represents the amount invested in the acquisition of property, plant and equipment 2007. 5.8824% of the total taka loan, principal must be repaid on a quarterly basis which will run for in the old unit from the accumulated tax holiday reserve of 2nd Phase Expansion Unit-1. The tax 17 quarters. holiday reserve has been transferred to general reserve upon fulfilment of necessary conditions All the above loans are secured by a first priority floating charge on the company's undertaking, as per Income Tax Ordinance 1984. property and assets, present and future including goodwill and money held to the credit of the 17 Loans and borrowings, net of current portion company's bank accounts to the extent of Tk. 5,247,720,000. Additional charge of IFC (Note 17.1) 618,404,345 1,022,524,515 Tk 2,000,000,000 has been created in favour of the new Local Syndicate Lenders. Total value of ADB (Note 17.1) 427,579,842 697,204,691 the charge created is Tk. 7,247,720,000. NORFUND (Note 17.1) 209,545,914 344,675,436 17.5 Loans and borrowings - current portion Eksportfinans ASA (Note 17.2) 76,980,013 160,631,803 As at As at NORAD (Note 17.3) 153,960,054 321,263,630 31 Dec 2008 31 Dec 2007 Local syndicated loan (Note 17.4) 1,827,146,776 1,930,000,120 Taka Taka 3,313,616,944 4,476,300,195 IFC 410,782,046 411,307,134 Less : Current portion (Note 17.5) 1,406,260,610 1,108,679,811 ADB 284,024,722 280,448,302 1,907,356,334 3,367,620,384 NORFUND 139,193,232 138,644,564 17.1 Loan from IFC, ADB and NORFUND Eksportfinans ASA 38,490,007 53,543,934 In 2004, Grameenphone Ltd. entered into loan agreements with IFC, ADB and NORFUND for a NORAD 76,980,027 107,087,877 total amount of USD 60 million, which was financed in proportion of 3:2:1 respectively. GP drew Local syndicated loan 456,790,577 117,648,000 USD 25 million (USD 12.5 million from IFC, USD 8.33 million from ADB and USD 4.17 million from 1,406,260,610 1,108,679,811 NORFUND) as the first instalment on 26 August 2004. The second and third instalments In determination of current portion of long term loan, the principal amount which will become due amounting to USD 15 million and USD 20 million respectively were drawn on 29 March 2005 and within twelve months from the balance sheet date has been considered. 26 April 2005 respectively. 18 Bond issued The loans are repayable in 10 half yearly instalments starting from 15 December 2005 with the Grameenphone Ltd. issued debt instruments in the form of Unsecured, Non-convertible, and freely following interest rates: transferable coupon bearing Bond on 11 November 2008, in an aggregate principal amount of Taka If net debt : EBITDA >_1; LIBOR + 3.5% per annum. 4,250 million through private placement with domestic investors. Each bond is denominated in If net debt : EBITDA <1 and >_ 0.5 ; LIBOR + 3.25% per annum. Taka 10 million with one tranche having 540 days tenor and the other tranche having 720 days tenor maturing for payment on 04 May 2010 and 31 October 2010 respectively. The bonds have an If net debt : EBITDA <0.5; LIBOR + 3.0% per annum. interest rate of 14.5% per annum, payable semi-annually. 17.2 Loan from Eksportfinans ASA The bonds will rank at least pari passu with the claims of the other unsecured and unsubordinated Grameenphone Ltd. borrowed NOK 25 million in December 2000 from Eksportfinans ASA, Norway creditors. with interest to be paid at the rate of 6 months NIBOR (the rate appearing on page NIBOR on the Reuters money rate service) plus 30 basis points per annum. The loan is repayable in 14 equal semi-annual instalments starting from 29 June 2004.

GP AR’08 64 65

64_Page Page_65 19 Deposit from agents and subscribers 21 Deferred tax liabilities As at As at Deferred tax assets and liabilities have been recognised and measured in accordance with the 31 Dec 2008 31 Dec 2007 provision of IAS/BAS 12: Income Taxes. Related deferred tax expense/income have been disclosed Taka Taka in note 43. Deferred tax assets and liabilities are attributable to the following: Taxable/ Security deposits from subscribers (Note 19.1) 411,388,949 476,561,490 Carrying amount (deductible) Security deposits from dealers and agents (Note 19.2) 71,265,000 80,756,112 at the balance temporary 482,653,949 557,317,602 sheet date Tax base difference 19.1 The amount of security deposits from subscribers represents security money obtained from Taka Taka Taka subscribers. This amount can be used in full or in part to adjust any amount due from subscribers. As at 31 December 2008 The amount is refundable to subscribers on their termination of relationship with GP. Property, plant and equipment 74,051,177,543 32,738,745,149 41,312,432,394 19.2 This amount of security deposits from dealers and agents represents security money obtained (excluding land and capital work in progress) from channel partners (i.e. dealer, distributor, outlet agent). This amount can be used in full or in Property, plant and equipment 6,402,100,304 - 6,402,100,304 part to adjust any amount due from channel partners. The amount is refundable to channel under finance lease partners on their termination of business relationship with GP. Difference for vehicle (21,627,366) - (21,627,366) 20 Finance lease obligation 80,431,650,481 32,738,745,149 47,692,905,332 Obligation under finance lease has been recognised as liability in the balance sheet at an amount equal to the present value of minimum lease payments. GP's incremental borrowing rate, which was 15% at the inception of the lease, was used to calculate the present value of minimum Accounts Receivable 4,146,484,000 4,390,067,871 (243,583,871) lease payments, as it was impracticable to determine the implicit interest rate at that time. Finance lease obligation (6,207,645,382) (6,207,645,382) Asset retirement obligation (52,283,997) (52,283,997) Finance lease of optical fibre network with Bangladesh Railway (BR) 6,207,645,382 6,800,786,553 Net taxable temporary difference 41,189,392,082 Less: Current portion of finance lease 1,160,709,556 1,485,227,318 5,046,935,826 5,315,559,235 Applicable tax rate 45%

The principal amount of lease obligation payable from the balance sheet date is as follows: Deferred tax liabilities 18,535,226,437 Lease payment Present value Present value As at As at As at 31 December 2007 31 Dec 2008 31 Dec 2007 Property, plant and equipment 69,714,232,193 32,229,523,923 37,484,708,270 Taka Taka Taka (excluding land and capital work in progress) Property, plant and equipment 6,389,155,256 - 6,389,155,256 (i) Not later than one year 2,002,206,462 1,160,709,556 1,485,227,318 under finance lease (ii) Later than one year but not later than five years 2,905,597,402 (237,452,687) 29,791,239 Difference for reclassification (59,972,229) - (59,972,229) (iii) Later than five years 13,377,854,707 5,284,388,513 5,285,767,996 Difference for vehicle (93,087,373) - (93,087,373) 18,285,658,571 6,207,645,382 6,800,786,553 75,950,327,847 32,229,523,923 43,720,803,924 Grameenphone entered into a lease agreement with Bangladesh Railway (BR) in 1997 for the right to use the optical fibre network along with its ancillary facilities. The lease was treated as Accounts Receivable 2,725,726,115 2,819,374,925 (93,648,810) operating lease until the end of 2004. Following an amendment to the lease agreement in 2004, Finance lease obligation (6,901,177,719) (6,901,177,719) it has been reclassified as finance lease and has been treated as such since 1 January 2005. Asset retirement obligation (36,747,882) (36,747,882) The lease agreement was further amended on 13 June 2007 with Guaranteed Annual Rental Net taxable temporary difference 36,689,229,513 (GAR) being revised and lease term being extended by 10 more years to June 2027. Considering the extended tenure and revised GAR, the leased asset and obligation have been adjusted with Applicable tax rate 45% the amount equal to the difference between the present value of the revised minimum lease payments and the carrying amount of lease obligation. Deferred tax liabilities 16,510,153,280

GP AR’08 66 67

66_Page Page_67 22 Long term payables and provisions 24.1 Frequency and Spectrum charges As at As at This relates to frequency / spectrum charges and roaming line rent. 31 Dec 2008 31 Dec 2007 24.2 Interconnection charges Taka Taka This represents provision for interconnection charges in respect of Local, NWD and ISD calls. Payable to Bangladesh Railway for X-Net Ltd. 4,882,500 4,882,500 According to the latest policy promulgated by BTRC, each operator including BTCL (formerly Asset retirement obligations (Note 22.1) 148,358,966 129,419,461 BTTB) is liable to pay interconnection charge for outgoing calls to other operators. Deferred revenue from X -Net Ltd. 11,392,500 11,392,500 24.3 PCM related expenses 164,633,966 145,694,461 This represents amount due to BTCL (formerly BTTB) for PCM (Pulse Code Modulation) related 22.1 Asset retirement obligation (ARO) expenses. 25 Income tax payable Opening balance 129,341,160 80,293,275 As at As at Provision made during the year 27,286,666 54,355,259 31 Dec 2008 31 Dec 2007 156,627,826 134,648,534 Taka Taka Adjustment during the year (8,268,860) (5,307,374) Closing balance 148,358,966 129,341,160 Opening balance 8,350,371,941 5,987,861,425 Provision made during the year 6,569,903,530 5,062,172,661 Grameenphone Ltd. recognises ARO in respect of roof-top BTS and office space based on the 14,920,275,471 11,050,034,086 present value of expected expenditure to be required to settle the obligation. Initial estimate of Paid during the year (including tax deducted at source) (4,842,709,822) (2,699,662,145) ARO is added to property, plant and equipment and unwinding of the discount is charged as 10,077,565,649 8,350,371,941 financial expense. 26 Unearned revenue 23 Accounts payable This includes mainly the unused portion of scratch cards, FlexiLoad and advance post-paid bills Liability for capital expenditure 2,550,938,946 7,061,913,455 received for which revenue has not been recognised yet. Payable for expenses: 27 VAT payable International roaming services 65,986,664 39,546,477 This represents VAT amount payable to NBR arising from provision of services by the company Training and travel expenses 29,196,555 57,178,975 that are subject to VAT. Sales and promotional expenses 173,111,438 101,524,340 28 Deferred connection revenue Consultancy and professional fees 444,664,720 333,458,307 Office and general expenses 228,175,498 200,327,944 Deferred connection revenue 474,142,173 617,206,217 Network operations and maintenance 80,624,229 126,962,362 Unearned revenue - sublease - 14,054 1,021,759,104 858,998,405 474,142,173 617,220,271 Payable for others: Movement of deferred connection revenue Bank guarantee for SIM and scratch card 2,099,434 2,099,434 Opening balance 617,220,271 885,519,464 Tax deducted at source from suppliers 134,530,211 124,536,047 Addition during the year 224,397,633 224,439,324 VAT deducted at source from suppliers 72,806,656 42,705,720 841,617,904 1,109,958,788 Retention money from suppliers 13,665,878 45,347,895 Recognised as revenue during the year (367,475,731) (492,738,517) 223,102,179 214,689,096 Closing balance 474,142,173 617,220,271 3,795,800,229 8,135,600,956 Payable for expenses include payable to Telenor, its subsidiaries and affiliates 29 Local interest bearing short-term borrowings Grameenphone has entered into credit facilities with 19 local banks for short-term working capital 24 Payable to government, autonomous bodies and other operators facility and loan agreements with 4 financial institutions for short-term loans. The aggregate Bangladesh Telecommunication Regulatory Commission (BTRC) amount of the working capital facility and the short term loans is Tk. 22,072.85 million. The Frequency and spectrum charges (Note 24.1) 286,971,639 652,616,699 facilities have a non-funded limit of Tk. 19,622.20 million and a funded limit of Tk. 9,240.65 Revenue sharing 877,127,718 832,232,261 million. The non-funded facilities include Letter of Credit, Letter of Guarantees and FX Forward. Liability for purchase of additional spectrum 3,330,000,000 - The funded facilities include overdraft facility, short-term loan and import loan. 4,494,099,357 1,484,848,960 29.1 Credit facility from Standard Chartered Bank Bangladesh Telecommunications Company Limited (BTCL) (a) Letter of credit (L/C) facility for Tk. 2,333 million (in 2007 Tk. 2,050 million). Interconnection charges (Note 24.2) 3,404,001,304 825,509,168 PCM related expenses (Note 24.3) 40,481,872 24,602,776 (b) Overdraft / short term loan facility for Tk. 950 million (in 2007 Tk. 750 million). 3,444,483,176 850,111,944

Revenue sharing with content providers 36,519,071 39,888,787 Supplementary duty on SIM payable to National Board of Revenue (NBR) 2,407,968,034 2,709,621,363 Share of sub-lease rent payable to Bangladesh Railway 4,603,261 13,557,714 Interconnection charges payable to other operators 765,007,231 751,595,006 GP AR’08 11,152,680,130 5,849,623,774 68 69

68_Page Page_69 29.2 Credit facility from Commercial Bank of Ceylon Ltd. (c) Bank guarantee facility for Tk. 100 million (inner limit of Murabaha Letter of Credit Tk. 980 (a) Letter of credit facility for Tk. 550 million (in 2007 Tk. 550 million). million). (b) Overdraft / short term loan facility for Tk. 210 million (inner limit of LC Tk. 550 million) (in 2007 29.13 Credit facility from The City Bank Ltd. Tk. 210 million). (a) Sight/usance letter of credit up to Tk. 590 million. (c) Foreign Exchange Forward arrangement for Tk. 550 million. (b) Overdraft/ short term loan facility for Tk. 370 million. 29.3 Credit facility from Citibank N.A. (c) Bank guarantee facility for Tk. 590 million (inner limit of L/C Tk. 590 million). (a) Sight/usance letter of credit up to Tk. 2,800 million (in 2007 Tk. 2,800 million). 29.14 Credit facility from Jamuna Bank Ltd. (b) Short term loan up to Tk. 2,100 million (inner limit of LC Tk. 2,800 million) (in 2007 Tk 2,100 million). (a) Sight/usance letter of credit up to Tk. 580 million. (c) Overdraft facility for Tk. 2,100 million (inner limit of LC Tk. 2,800 million) (in 2007 Tk 2,100 million). (b) Overdraft/LTR facility for Tk. 230 million (inner limit of L/C Tk. 580 million). The short term loan and the overdraft limits are interchangeable. Total funded exposure under the 29.15 Credit facility from Trust Bank Ltd. short-term loan and the overdraft facility may not exceed Tk. 2,100 million at any point of time. (a) Sight/usance letter of credit up to Tk. 400 million. 29.4 Credit facility from HSBC (b) Overdraft facility for Tk. 280 million. (a) Sight/usance letter of credit up to Tk.2,300 million (in 2007 Tk 1,620 million). (b) Short-term loan up to Tk. 700 million (inner limit of LC Tk. 2,300 million) (in 2007 Tk. 500 million). 29.16 Credit facility from Premier Bank Ltd. (a) Sight/usance letter of credit up to Tk. 910 million. (c) Overdraft facility for Tk. 150 million (inner limit of LC Tk. 2,300 million) (in 2007 Tk. 100 million). (d) Foreign Exchange line up to Tk. 10 million (in 2007 Tk. 30 million). (b) Overdraft facility for Tk. 390 million (inner limit of L/C Tk. 910 million). Combined funded exposure will not exceed Tk. 700 million at any point of time. (c) Bank guarantee facility for Tk. 910 million (inner limit of L/C Tk. 910 million). 29.5 Credit facility from Prime Bank Ltd. 29.17 Credit facility from Bank Asia Ltd. (a) Sight/usance letter of credit up to Tk. 1,500 million (in 2007 Tk. 1,500 million). (a) Sight/usance letter of credit up to Tk. 280 million. (b) Overdraft/LTR facility for Tk. 950 million (inner limit of LC TK. 1,500 million) (in 2007 Tk. 600 million). (b) Overdraft facility for Tk. 270 million. 29.6 Credit facility from Eastern Bank Ltd. 29.18 Credit facility from EXIM Bank Ltd. (a) Sight/usance letter of credit up to Tk. 1,400 million (in 2007 Tk. 1,250 million). (a) Sight/usance letter of credit up to Tk. 300 million. (b) Short-term loan/LTR facility for Tk. 600 million (inner limit of LC Tk. 1,400 million) (in 2007 (b) Bai Muajjal (cash credit) facility for Tk. 225 million. Tk. 540 million). 29.19 Credit facility from Bank Alfalah Ltd. (c) Overdraft facility for Tk. 100 million (inner limit of LC Tk. 1,400 million) (in 2007 Tk. 100 million). (a) Sight/usance letter of credit up to Tk. 525 million. (d) Bank Guarantee limit up to Tk. 150 million (inner limit of LC Tk. 1,400 million) (in 2007 Tk. 70 million). (b) Cash finance facility for Tk. 225 million. (inner limit of L/C Tk. 525 million). Combined funded exposure will not exceed Tk. 600 million at any point of time. (c) Bank guarantee facility for Tk. 300 million (inner limit of L/C Tk. 525 million). 29.7 Credit facility from One Bank Ltd. 29.20 Short term loan facility from National Housing Finance and Investments Ltd. (a) Sight/Usance letter of credit up to Tk. 660 million (in 2007 Tk. 660 million). Short term loan for Tk. 150 million. (b) Overdraft/LTR/ Time loan facility for Tk. 280 million (inner limit of LC Tk. 660 million) (in 2007 The above short-term credit facilities are availed on an unsecured basis and are backed by Tk. 280 million). standard charge documents of individual banks and financial institutions. (c) Bank guarantee limit up to Tk. 10 million (inner limit of LC Tk. 660 million) (in 2007 Tk. 10 million). As per GP Board of Directors' approval, the total amount of short-term credit facilities from the 29.8 Credit facility from BRAC Bank Ltd. above banks is limited to a maximum outstanding limit of US$ 210 million equivalent Taka. (a) Sight/usance letter of credit up to Tk. 1,300 million (in 2007 Tk. 990 million). However, the ratio of financial indebtedness to shareholders' equity should not exceed 2:1 as per (b) Overdraft/short term loan facility for Tk. 550 million (inner limit of L/C Tk. 990 million) (in 2007 the financial covenants under our long-term loans and borrowings. Tk. 420 million). 29.21 Credit facility from Other Banks 29.9 Credit facility from Dhaka Bank Ltd. (a) Other banks include Islami Bank, Mercantile Bank, National Bank, IFIC Bank, Southeast Bank, (a) Sight/usance letter of credit up to Tk. 1,000 million (in 2007 Tk. 1,000 million). Sonali Bank, UCBL Bank and Agrani Bank, which are mainly used for collection purpose. (b) Short term Loan/LTR facility for Tk. 435 million (inner limit of LC Tk. 1,000 million) (in 2007 Tk. 435 (b) Facilities with all the banks are free of any charge. million). The short-term credit facilities are availed on an unsecured basis and are backed by standard 29.10 Credit facility from Dutch Bangla Bank Ltd. charge documents of individual banks and financial institutions. (a) Sight/usance letter of credit up to Tk. 930 million (in 2007 Tk. 600 million). As per GP Board of Directors' approval, the total amount of short-term credit facilities from the (b) Short term loan/LTR/overdraft facility for Tk. 390 million (inner limit of LC Tk. 930 million). above banks is limited to a maximum outstanding limit of US$ 210 million equivalent. However, the ratio of financial indebtedness to shareholders' equity may not exceed 2:1 as per the financial 29.11 Credit facility from Woori Bank covenants under our long-term loans and borrowings. (a) Sight/usance letter of credit up to Tk. 274.20 million. (b) Overdraft facility for Tk. 205.65 million. 29.12 Credit facility from Shahjalal Islami Bank Ltd. (a) Sight/usance Murabaha letter of credit up to Tk. 980 million. (b) Mubaraha Post Import TR/ Bai Muajjal Comm. facility for Tk. 430 million (inner limit of Murabaha GP AR’08 Letter of Credit Tk. 980 million). 70 71

70_Page Page_71 29.22 Outstanding balances of local interest bearing short-term borrowings 32 Revenue As at As at For the year ended For the year ended Name of banks 31 Dec 2008 31 Dec 2007 31 Dec 2008 31 Dec 2007 Taka Taka Taka Taka Standard Chartered Bank 750,000,000 752,355,943 Traffic revenue Citibank, N.A. 1,200,000,000 1,183,021,434 -Postpaid 3,416,682,161 6,890,485,179 HSBC 4,630,365 727,216,334 -Prepaid 47,933,000,073 39,794,262,265 Commercial Bank of Ceylon Limited - 198,847,673 51,349,682,234 46,684,747,444 BRAC Bank Limited 38,448,279 408,555,991 Subscription revenue Eastern Bank Limited 300,000,000 540,000,000 -Postpaid 530,770,936 448,536,521 One Bank Limited - 282,093,700 -Prepaid - - Prime Bank Limited 17,287,931 616,744,078 530,770,936 448,536,521 Dhaka Bank Limited 435,000,000 200,000,000 Connection revenue Trust Bank Limited 277,080,133 - -Postpaid 55,298,487 132,298,916 Woori Bank Limited 194,349,170 - -Prepaid 299,746,027 252,361,082 Dutch Bangla Bank Limited 385,482,080 - 355,044,514 384,659,998 Shahjalal Islami Bank Limited 300,000,000 - Roaming revenue Jamuna Bank Limited 225,204,608 - -Inbound 175,091,485 158,652,029 Premier Bank Limited 347,629,804 - -Outbound 222,432,040 228,281,038 Bank Asia Limited 267,219,153 - 397,523,525 386,933,067 Bank Alfalah Ltd. 99,991,393 Interconnection revenue National Housing Finance and Investment Limited 150,000,000 - -Postpaid 155,551,770 234,336,488 4,992,322,916 4,908,835,153 -Prepaid 6,361,791,542 4,371,041,250 6,517,343,312 4,605,377,738 30 Provision for expenses Other operating revenue International roaming services 25,294,597 30,521,099 -Customer support revenue 16,235,152 10,690,264 Personnel expenses 947,685,525 588,072,056 -VAS revenue (Note 32.1) 2,103,492,885 1,744,370,057 Obligation in respect of employees Provident Fund 21,288,716 11,626,153 2,119,728,037 1,755,060,321 Training and travel expenses 23,850,003 47,681,771 Other non- mobile revenue Sales and promotional expenses 526,639,170 324,456,423 - Sale of handsets 28,254,167 4,957,356 Consultancy and professional fees 344,613,452 222,852,718 - Channel fees 57,188,661 31,822,515 Network operations and maintenance 1,173,794,521 270,371,826 - Bills pay service 3,442,732 1,050,972 Provision for capital expenditure 5,326,924,372 636,225,088 88,885,560 37,830,843 Office and general expenses (Note 30.1) 986,219,679 26,749,394 61,358,978,118 54,303,145,932 Operating lease rent payable to Power Grid Company of Bangladesh Ltd. 17,562,134 2,499,999 32.1 VAS revenue includes revenue from SMS/MMS services, internet facilities (EDGE/GPRS), medical 9,393,872,169 2,161,056,527 services and music download services. Provision for expenses include provision for payable to Telenor, its subsidiaries and affiliates. 33 Direct cost of network revenue 30.1 Provision for office and general expenses relates to vehicle running expenses, stationery, utility, Cost of interconnection (Note 33.1) 5,981,299,890 5,512,358,769 communication expenses etc. Cost of SIM card, scratch card and handsets 792,264,197 938,145,964 International roaming costs (Note 33.2) 203,327,269 205,398,758 31 Advance against PPO Revenue sharing with BTRC (Note 33.3) 3,029,973,262 2,774,547,021 The company is in the process of getting publicly listed with two Stock Exchanges of the country Revenue sharing with content providers 934,133 2,867,197 namely Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE). Application along Dealers and agency commission 3,927,278,438 3,359,248,237 with all required papers was submitted to the Securities and Exchange Commission (SEC) on 13,935,077,189 12,792,565,946 December 11, 2008 and the approval of the capital issue is awaiting. As part of this process, the company received an amount of Tk. 4,136,642,172 from various institutional investors,Grameen 33.1 Cost of interconnection Bank borrowers fund as well as from the employees of the company for Pre-IPO placement. As per the latest policy promulgated by BTRC, each operator along with BTCL (formerly BTTB) is Allotment of shares to the Pre-IPO subscribers will be made upon receipt of approval from the SEC. liable to pay interconnection charges for outgoing calls to other operators based on data provided by interconnection exchange (ICX) and international gateway (IGW). Cost of interconnection is recorded on the basis of traffic to other operators, which is regulated and settled through interconnection agreements between Grameenphone and other operators.

GP AR’08 72 73

72_Page Page_73 33.2 International roaming costs 37 General and administrative expenses For the year ended For the year ended GP is required to pay roaming charges to the roaming partners when GP subscribers use their 31 Dec 2008 31 Dec 2007 network, based on roaming agreement between the parties. Taka Taka 33.3 Revenue sharing with BTRC 3,580,873,187 2,784,789,505 As per the amendment of the operating licence agreement (clause 3.3) dated 16 April 2006, GP is Personnel expenses (Note 37.1) 45,880,345 132,743,408 required to pay 5.5 % of the collected rent and call charges to BTRC with effect from 1 July 2005. Employee training and ancillary expenses 358,810,853 353,248,518 Before this amendment, GP was required to pay 1% of the call charges to Bangladesh Rent (Note 37.2) 626,347,053 732,574,142 Telecommunication Regulatory Commission (BTRC). Office maintenance and running expenses Travelling expenses 104,559,220 114,715,671 34 Network operation and maintenance expenses Vehicle running expenses 349,520,516 300,991,542 For the year ended For the year ended Telephone and communication 106,885,846 107,832,446 31 Dec 2008 31 Dec 2007 Printing, postage and stationery 133,148,768 195,025,462 Taka Taka Legal and professional fees 24,439,493 9,724,733 Rent (Note 34.1) 523,493,294 390,678,324 Audit fees 41,869,522 8,336,001 Electricity charges (Note 34.2) 1,066,936,844 830,772,051 Licence fees and spectrum charges (Note 37.3) 923,443,577 313,218,201 Operation and maintenance - base station 1,016,508,495 735,090,341 Meeting expenses (Note 37.4) 17,209,323 32,357,312 Operation and maintenance - switch 934,459,745 (120,599,372) Entertainment expenses 25,142,482 42,122,620 Operation and maintenance - optical fibre network 131,792,285 23,567,191 Revenue collection charges 23,837,457 20,017,372 Network quality maintenance expenses (Note 34.3) 788,138,233 610,849,956 6,361,967,642 5,147,696,933 PCM operation and maintenance (Note 34.4) 40,128,241 37,799,276 4,501,457,137 2,508,157,767 37.1 34.1 Rent includes location rent for base stations , switch and other locations. Personnel expenses include company's contribution to recognized provident fund of 34.2 Electricity charges include electricity charges for running base stations, switches and selected Tk 190,353,090 and provision for gratuity fund of Tk 58,065,942. offices of Bangladesh Railway. Personnel expenses include Tk 8,048,736 relating to share based payment to key management 34.3 Network quality maintenance expenses include consultants' expenses and network operational personnel with respect to entitlement of parent company's shares. The vesting period for such services and maintenance fees. entitlement is three years. The policy on share based payment including the underlying valuation method is guided by group policy. 34.4 PCM operation and maintenance includes rental charges of PCM, maintenance charges of PCM 37.2 and microwave link. Rent includes rent for office, warehouse, GPC, GPSD, GPDC, GPCF info-center and guest houses. 35 Depreciation and amortisation Grameenphone has following contingent liability against future lease rental for office and BTS locations: Cost of network operation: 682,581,246 313,729,917 Depreciation of property, plant and equipment (i) Not later than one year 13,186,081,885 9,101,623,190 (ii) Later than one year but not later than five years 2,206,975,538 1,329,368,247 (iii) Later than five years 4,737,169,100 3,758,469,980 Amortisation of network system software 55,713,418 10,478,393 7,626,725,883 5,401,568,144 Amortisation of telecommunication licences 9,216,157 - Amortisation of non-telecommunication licences 81,220,167 10,071,554 37.3 According to licence agreement , Grameenphone is required to pay these fees to BTRC. The 146,149,742 20,549,947 amount includes operating licence fee, spectrum fee and roaming line rent charges. In 2008 13,332,231,627 9,122,173,137 BTRC has initiated a project “Lawful Interception Compliance (LIC)” compulsorily to be financed Operating expenses: by all the mobile operators. Accordingly, Grameenphone paid it’s share of cost of Depreciation of property, plant and equipment 1,181,365,675 911,554,550 BDT 230,765,302 in May 2008 and provided BDT 70,000,000 for related expenses. 630,559,528 362,096,226 Amortisation of business system software 37.4 1,811,925,203 1,273,650,776 Meeting expenses include expenses incurred for Board of Directors and members of operational 15,144,156,830 10,395,823,913 committee for attending the board meetings and operational committee meetings respectively. No fees were paid to the members for attending the meetings. 36 Other income, net Sub-lease rental income from optical fibre network 62,755,962 138,129,714 Franchisee fee 5,028,724 4,501,192 Sub lease cost (15,202,058) (38,870,139) 52,582,628 103,760,767

GP AR’08 74 75

74_Page Page_75 38 Selling and distribution expenses 44 Income tax expenses For the year ended For the year ended For the year ended For the year ended 31 Dec 2008 31 Dec 2007 31 Dec 2008 31 Dec 2007 Taka Taka Taka Taka Advertisements 864,591,192 1,051,696,324 Current tax expense 6,569,903,530 5,062,172,661 Business development and promotional expenses 369,916,574 447,590,843 Deferred tax expense (Notes 44.1) 2,025,073,157 5,412,840,614 Sales, marketing and representation costs 4,640,843,887 5,161,131,235 8,594,976,687 10,475,013,275 5,875,351,653 6,660,418,402 44.1 Deferred tax has been recognised to account for the tax consequence of transactions and other 39 Bad debt expense events recognised in the financial statements. Deferred tax expenses arise mainly due to Gross provision made during the period 260,530,744 148,643,786 difference in the carrying amount of the assets that will result in taxable amount in determining Recovery of bad debt during the period (16,946,873) (13,353,519) taxable profit or loss of future periods when the carrying amount of the asset would be recovered Bad debt expense 243,583,871 135,290,267 or settled. 45 Earnings Per Share Provision for doubtful debts has been made as per policy of the company mentioned in note 3.4. Profit attributable to ordinary shareholders 2,983,866,587 3,059,840,018 40 Finance costs, net Weighted average number of ordinary shares outstanding during the year (Note 45.1) 12,151,747,970 12,151,747,970 Interest on long term loans 314,968,528 245,236,902 Earnings Per Share (EPS) 0.246 0.252 Interest on bonds 79,512,361 - Interest and service charge on short-term debt 956,531,502 179,184,471 Weighted average number of ordinary shares: Foreign exchange (gain)/loss - IR receivable (292,037,932) 73,838,813 Outstanding ordinary shares at 1 January 56,519,758 56,519,758 Finance charge - lease 727,226,707 494,203,734 Interest (accretion) on ARO 15,536,115 12,975,881 Share split from BDT 43 to BDT 1 2,430,349,594 2,430,349,594 Finance charges 96,592,571 82,511,025 Issue of bonus shares (4 shares against each) 9,721,398,376 9,721,398,376 1,898,329,852 1,087,950,826 Weighted average number of ordinary shares 12,151,747,970 12,151,747,970 Finance income (93,080,560) (139,465,142) 1,805,249,292 948,485,684 Basic earnings 41 (Gain)/Loss on disposal of property, plant and equipment This represents earnings for the year attributable to the ordinary share holders. As there was no Sale proceeds (76,107,924) (62,813,546) preference dividend , minority interest or extraordinary items, the net profit after tax has been Written down value of the assets sold 41,981,782 74,780,231 considered as fully attributable to the ordinary shareholders. Cost of CWIP written off - 89,996,270 45.1 Weighted average number of ordinary shares (34,126,142) 101,962,955 This represents the number of ordinary shares outstanding at the beginning of the year plus the number of ordinary shares converted and issued during the year. 42 Compensation to Bangladesh Telecommunication Regulatory Commission (BTRC) 45.2 Dilution of earnings per share Compensation to BTRC 2,000,000,000 2,184,242,956 No diluted earnings per share is required to be calculated for the years presented as there was no 2,000,000,000 2,184,242,956 scope for dilution during these years. This relates to the settlement agreement between Grameenphone and BTRC dated 14 August 46 Financing of operation 2008 to pay a fine of Tk. 2,500,000,000 for Grameenphone's involvement in unregulated As at the balance sheet date total current liabilities exceeded total current assets by international call termination business through VoIP prior to February 2007. In December 2007, Tk. 35,801,135,096 (2007: Tk. 29,593,602,701). Current liabilities however, include deferred Grameenphone took a provision for BDT 500,000,000 in this regard and remaining revenue and unearned revenue of Tk. 17,593,433. BDT 2,000,000,000 was charged in 2008. As per the agreement, Grameenphone paid Management is confident of meeting all its obligations as they fall due and of being able to BDT 1,500,000,000 by 30 September 2008 and the balance of BDT 1,000,000,000 was paid on finance expansion plans by way of support from existing bankers to the company and from 29 October 2008. equipment vendors. In addition, new sources of finance are also being considered and acted upon 43 Share of profit of X - Net Ltd. including an Initial Public Offering. Share of profit/(loss) - 2,591,417 - 2,591,417

GP AR’08 76 77

76_Page Page_77 47 Related party transactions For the year ended For the year ended 31 Dec 2008 31 Dec 2007 Name of related parties Nature Nature of transactions Taka Taka Telenor Mobile Communications AS Shareholder Dividend payment for previous year 934,225,557 904,089,250 Nye Telenor Mobile Communications II AS Shareholder -do- 267 258 Nye Telenor Mobile Communications III AS Shareholder -do- 267 258 Telenor Asia Pte. Ltd. Shareholder -do- 267 258 Grameen Telecom Shareholder Revenue 1,183,020,136 3,283,766,459 Revenue received 605,480,077 4,830,795,105 Commission expense 90,631,360 - Dividend payment for previous year 572,590,336 554,119,680 Grameen Kalyan Shareholder Dividend payment for previous year 27 26 Grameen Shakti Shareholder Dividend payment for previous year 27 26 Telenor ASA Group entity Sharing of Microsoft license fee 144,698,303 105,930,027 Consultancy service fee 344,429,369 273,152,665 Telenor Consult AS Group entity Consultancy and professional service fee 422,526,851 258,081,728 Telenor Asia Pte. Ltd. Consultancy service fee 36,839,032 - Digi Telecommunication Group entity Roaming revenue 1,080,011 1,417,557 Roaming expenses 1,665,849 1,826,128 Kyivstar GSM - Ukraine Group entity Roaming revenue 74,486 115,505 Roaming expenses 56,768 94,794 Telenor d.o.o (YUGMT) Group entity Roaming revenue 51,570 6,131 Roaming expenses 8,322 39,903 Pannon - GSM Group entity Roaming revenue 77,163 35,235 Roaming expenses 154,359 61,390 Sonofone Group entity Roaming revenue 1,230,992 880,791 Roaming expenses 476,208 374,514 Telenor Mobil AS Group entity Roaming revenue 3,555,610 3,694,974 Roaming expenses 682,197 702,178 Telenor Pakistan Group entity Roaming revenue 126,878 174,784 Roaming expenses 554,647 487,991 TAC(Total Access Communication) Group entity Roaming revenue 2,610,916 1,555,330 Roaming expenses 9,743,626 12,026,482 Telenor Sverige (Europolitan AB) Group entity Roaming revenue 969,500 578,224 Roaming expenses 576,067 532,086 ProMonte GSM, Serbia and Montenegro YUGPM Group entity Roaming revenue 16,714 13,981 Roaming expenses 116,641 -

47.1 Receivables/(payables) with related parties As at As at 31 Dec 2008 31 Dec 2007 Name of related parties Nature Nature of transactions Taka Taka Grameen Telecom Shareholder Accounts receivable 118,998,837 115,953,550 Accounts payable 65,420,997 Telenor ASA Group entity Accounts payable 793,790,123 738,072,998 Accounts receivable 3,048,714 Telenor Consult AS Group entity Accounts payable 374,881,157 Accounts receivable 62,195,912 Telenor Asia Pte. Ltd. Shareholder Accounts payable 31,727,426 31,909,372 Accounts receivable 633,882 Digi Telecommunication Group entity Accounts payable 834,778 581,468 Accounts receivable 281,954 302,424 Kyivstar GSM - Ukraine Group entity Accounts payable 9,510 36,105 Accounts receivable 23,938 28,210 Telenor d.o.o (YUGMT) Group entity Accounts payable 9,263 941 Accounts receivable 43,029 692 Pannon - GSM Group entity Accounts payable 48,580 35,662 Accounts receivable 46,625 23,495 Sonofone Group entity Accounts payable 216,730 57,860 Accounts receivable 197,767 432,140 Telenor Mobil AS Group entity Accounts payable 464,736 477,345 Accounts receivable 1,322,895 2,772,821 Telenor Pakistan Group entity Accounts payable 326,921 148,929 Accounts receivable 171,480 160,089 TAC(Total Access Communication) Group entity Accounts payable 3,302,916 4,470,218 Accounts receivable 1,944,090 547,308 Telenor Sverige (Europolitan AB) Group entity Accounts payable 72,485 211,625 Accounts receivable 647,683 245,751 ProMonte GSM, Serbia and Montenegro YUGPM Group entity Accounts payable 31,092 159 Accounts receivable 12,529 7,519

GP AR’08 78 79

78_Page Page_79 47.2 Key management personnel compensation 50.3 Contingent liabilities for lawsuits For the year ended For the year ended There are few litigations against Grameenphone Ltd. Management, in consultation with lawyers, has 31 Dec 2008 31 Dec 2007 reviewed the merits of those lawsuits to assess the potential impact that those may have on the Taka Taka financial position and financial performance of Grameenphone Ltd. Based on such assessment, management is of the opinion that the likelihood of losing those lawsuits is remote and therefore no Key management personnel compensation comprises: provision has been taken in the accounts. Short-term employee benefits (salary and other allowances) 922,250,259 631,538,123 Post employment benefits (provident fund, gratuity etc.) 58,957,031 60,548,815 51 Other disclosures Termination benefits - - 51.1 Number of regular employees receiving remuneration of Tk. 36,000 or above per annum was 3,687 Other long-term benefits - - as at 31 December 2008 and was 2,203 as at 31 December 2007. Share based payments 8,048,736 994,739 989,256,026 693,081,677 51.2 Comparative figures have been rearranged wherever considered necessary to conform to the current year’s presentation. Key management personnel includes employees of the rank of Deputy General Manager and above. 51.3 Events after the balance sheet date 48 Expenses and revenue in foreign currency The Board of Directors of X-Net in its meeting on 12 January 2009 has approved the arrangement CIF value of imports: of transfer GP's share in X-Net to one of its shareholders. Grameenphone also intends to sign a SIM and scratch card 183,058,899 380,685,619 final settlement agreement in settlement of all issues with X-Net Ltd. To this effect, X-Net Ltd. is to Telecommunication equipments 11,274,252,547 19,203,792,909 be treated as one of Grameenphone‘s regular customers of optical fiber network. Expenditure in foreign currency during the year: Subsequent to the balance sheet date, the Board of Directors recommended a dividend of Tk. 0.13 Consultancy fee 500,042,256 330,533,370 per share amounting to Tk. 1,579,727,236 at the board meeting held on 16 March 2009, which is Consultancy fee - expatriate 358,374,808 250,045,179 subject to shareholders’ approval at the forthcoming annual general meeting. Other fee (travel and training) 51,105,794 113,609,831 Except for the facts as stated above, no circumstances have arisen since the balance sheet date Technical know how 973,063,285 337,298,340 which would require adjustments to, or disclosures in, the financial statements. International roaming cost 199,182,350 205,398,758 Foreign earnings: Revenue from roaming partners 170,722,456 158,398,758

C&F charges of SIM & scratch card and telecommunication equipment for the 2008 were Tk. 1,222,309 and Tk. 38,816,231 respectively. The same for 2007 was Tk. 3,701,284 and Tk. 109,393,532 respectively. 49 Capital commitments Capital commitments represent the orders placed for purchase of network equipments and other services. Major vendors were Huawei and Ericsson.

As at As at 31 Dec 2008 31 Dec 2007 Taka Taka

Capital commitments 8,353,367,274 18,711,007,834

50 Contingent liabilities 50.1 Contingent liabilities arising from letters of credit Outstanding letters of credit 2,367,926,759 1,323,854,787 50.2 Bank guarantee provided against various parties As at 31 December 2008, GP has outstanding bank guarantee amounting to Tk 504,028.096 on account of import of SIM, Scratch card, capital machinery and some other operational issues like utility connection and contract with PGCB for lease of optical fiber network.

GP AR’08 80 81

80_Page Page_81 Corporate Governance is the structured process through which an organization is directed, controlled and held accountable. It clearly defines the rights and responsibility of the Board, Management, Shareholders and other Stakeholders like Government and the society at large. Grameenphone believes in the continued improvement of corporate governance. This in turn has led the company to commit considerable resources and implement internationally accepted Corporate Standards in its day-to-day operations. The Board of Directors and the Management Team of Grameenphone are committed to maintaining effective Corporate Governance through a culture of accountability, transparency, well-understood policies and procedures. The Board of Directors and the Management Team also ensure Corporate Governance maintaining of compliance with all applicable laws of Bangladesh and internally developed policies, procedures and controls. in Grameenphone The Articles of Association (AOA) is the key governance guideline for the company set by the Shareholders. The Board of Directors and Management Team run the affairs of the Company in compliance with the guidelines of the AOA and the Companies Act. 1994. Internal and external rules and procedures provide Grameenphone with a sound platform for good corporate governance and for further development of a positive, responsible and healthy corporate culture. Board of Directors The Directors of the Board are appointed by the Shareholders in the Annual General Meeting (AGM) who are accountable to the Shareholders. The Board is responsible for guiding the company towards the goal set by the Shareholders. The Board also ensures that Grameenphone Policies & Procedures and Codes of Conduct are implemented and maintained; and the company adheres to generally accepted principles for the governance and effective control of company activities. In addition to the other legal guidelines, the Grameenphone Board has also adopted “Governance Guidelines for the Board” for ensuring better governance in the work and the administration of the Board. At present, the Board of Directors in Grameenphone is comprised of five members including the Chairman, who is elected from amongst the members. However, the Shareholders are in process of appointing four new Directors including one Independent Director in the context of the newly adopted AOA. The AOA requires the Board to meet at least four times a year and otherwise when duly called for in writing by a Board member or Shareholder. Dates for Board Meetings in the ensuing year are decided in advance and published as part of the Board Calendar together with the main agenda items and the notice of each Board Meeting is given in writing. Board Committees a) Audit Committee The Grameenphone Audit Committee was established in late 2008 as a sub-committee of the Board. As per the Audit Committee Charter, the audit committee shall be comprised of three members of the Board including an Independent Director, and shall be appointed by the Board. The Chief Executive Officer, the Chief Financial Officer, the Company Secretary and the Head of Internal Audit are permanent invitees to the Audit Committee meetings. The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to internal control, financial reporting, risk management, auditing matters and Grameenphone’s processes of monitoring compliance with applicable legal and regulatory requirements and the Code of Conduct. The Audit Committee Charter as approved by the Board defines the purpose, authority, composition, meetings, duties and responsibilities of the Audit Committee. b) Treasury Committee This committee consists of two representatives from the Shareholders and the Chief Financial Officer of the Company. All significant financial matters which concern the Board are discussed in this committee in detail. Upon endorsement of the Treasury Committee, such issues are forwarded to the Board for their final review and approval.

GP AR’08 82 83

82_Page Page_83 Management Team (MT) The Management Team is the executive committee of Grameenphone managing the affairs of the company. The Management Team consists of the CEO and other key leaders across the company. The CEO is the leader of the team. Management Team endeavors to achieve the strategic goals & mission of the company set by the Board of Directors. The Management Team meets on a weekly basis to monitor the business performance of the company. Control Environment in Grameenphone In implementing the right Governance in Grameenphone, the Board and the Management Team ensures the following: a) Business Plan & Forecast Grameenphone has strong financial reporting procedures in line with the The Management each year prepares the Strategy and Business Plan which is approved by the requirements of International Financial Reporting Standard (IFRS), Bangladesh Board. Such plans are prepared and modified from time to time considering the forecast & market Accounting Standard (BAS) and other local legislations. In 2006, situation. Grameenphone implemented total automation under the ERP system b) Financial Reporting (Enterprise Resource Planning). Financial reports are generated from this Grameenphone has strong financial reporting procedures in line with the requirements of automated platform. International Financial Reporting Standard (IFRS), Bangladesh Accounting Standard (BAS) and other local legislations. In 2006, Grameenphone implemented total automation under the ERP system (Enterprise Resource Planning). Financial reports are generated from this automated platform. Apart from the statutory reporting, Grameenphone also maintains regular group reporting to its group company Telenor which consolidates all its subsidiarys’ financial information in its consolidated Financial Statements. c) Management of Assets Grameenphone is continuously investing in telecom network and other related infrastructure in line with the Business Plan. To maintain accountability and proper utilization of assets, it complies with clearly defined and approved policies starting from procurement, recording, reporting and up to the level of disposal of assets. To ensure proper safeguarding of assets, physical verification of network assets is conducted periodically on test basis and all risks relating to these assets are properly insured both locally and internationally. d) Statutory Audit Statutory Audit of the company is governed by the Companies Act, 1994 of Bangladesh. The Companies Act explicitly provides guidelines for the appointment, scope of work and retirement of auditors. Shareholders appoint auditors and fix their remuneration in the Annual General Meeting. The Shareholders appoint Auditors upon evaluation in the AGM. M/S Rahman Rahman Huq, a member firm of KPMG is the Statutory Auditor of the company. In addition to the annual audit, the auditors carry out interim audit and review the quarterly financial reports of the Company. e) Internal Audit Internal Audit supports the company to achieve its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of its risk management, control and governance processes. To ensure organizational independence of Internal Audit, the Head of Internal Audit reports functionally to the Audit Committee and administratively to the Chief Executive Officer. Internal Audit activity is governed by the Internal Audit Charter, which is approved by the Board. With a view for continual improvement of the effectiveness and efficiency of Internal Audit activities, the department is managed through three distinct audit streams: Finance, Technology and General Business processes. Internal Audit discharges its duties on a risk-based audit plan, covering the strategic imperatives and major risks surrounding Grameenphone, while considering pervasive audit needs. Grameenphone Internal Audit also works closely with Telenor Group Internal Audit in sharing knowledge and resources to ensure achievement of internal audit deliverables.

GP AR’08 84 85

84_Page Page_85 f) Internal Control j) Business Continuity Management (BCM) Grameenphone has established a strong internal control environment as a part of good Business Continuity Management (BCM) process has been adopted in Grameenphone to Corporate Governance. Internal Control is a process, supported by an entity's board of directors, further strengthen organizational resiliency. It helps Grameenphone in building capability for management, and other personnel, designed to provide reasonable assurance regarding the an effective response to any sudden business disruption which may be caused by man-made achievement of company objectives in the areas of: incident or any natural disaster such as flood, fire, earthquake etc. It is also safeguarding the interest of key stakeholders, reputation, brand and value creating activities. • Effectiveness and efficiency of operations The objective of BCM is to establish infrastructure resilience and recovery strategies for • Reliability of financial reporting and minimizing potential impacts by restoring critical business functions within stipulated time from • Compliance with laws and regulations disruption. In this process, after an assessment of the probability and impact of the potential risks, detail plans are prepared in order to prevent and manage the risks, minimize the impact, There are five essential components of internal control which are: Control environment, Risk and secure the continuity of the business in the long run. assessment, Control activities, Information & Communication and Monitoring. All of these five components of internal control are embedded in the control culture of Grameenphone Ltd. k) Codes of Conduct Grameenphone has adopted a clearly defined Codes of Conduct approved by the Board of g) Risk Management Directors for securing good business ethics and conduct in all aspects of the company’s Risk Management at Grameenphone is concerned with earning competitive returns from the activities. The Codes of Conduct are properly communicated to all the employees and others company’s various business activities at acceptable risk levels and without compromising the acting on behalf, who are strictly required to abide by it. company’s corporate social responsibilities. It has a cross-functional, multi-disciplinary focus that recognizes the Risks that cut across core business activities as well as organizational boundaries. l) Management & Leadership Development It supports the company’s competitiveness by developing a culture, practice and structures that Employees are one of the most important assets of Grameenphone. Grameenphone has systematically recognize and addresses future opportunities whilst managing adverse effects and adopted the following tools to develop leaders from within the company : threats through recognizing risk and acting appropriately upon it. i. Telenor Development Process Grameenphone Ltd. has well defined risk management policy, procedures and processes to Telenor Development Process (TDP) has been adopted by Grameenphone since 2005 as mitigate both the internal control risk and enterprise level risk. The process of risk management in leadership development procedure. The TDP process aims to set direction, manage Grameenphone Ltd. is a combination of risk identification, risk analysis & measurement, and risk performance and develop individual, team and organizational capabilities to deliver business planning & monitoring. Risk Management contributes as an efficiency enhancer in both financial results. Under this process, critical positions are identified, along with the requirements to fill and non-financial areas across the company. such positions. Talents and potential successors are also identified, as are candidates for future management positions. TDP at Grameenphone supports leaders and employees in h) Sarbanes Oxley Compliance developing capabilities in strategic areas thereby ensuring a responsible and productive Grameenphone has also implemented sound internal controls over financial reporting in line corporate environment. with the requirements of the Sarbanes-Oxley Act (SOX) in 2006. ii. Internal Value Creation (IVC) Although the parent Company ‘Telenor’ is no longer enlisted in NASDAQ, it has adopted a Each year a formal survey named Internal Value Creation (IVC) is conducted where all the strategy in line with the requirement of SOX that such internal control monitoring shall continue employees participate and express their independent views about the organization, their as if Telenor was US listed company. Grameenphone Ltd. has successfully implemented a strong motivation, processes and improvement opportunities. The survey provides valuable set of internal control points in its major class of transactions as well as in the IT section. information for the strategic work and is an important management tool used actively in the Grameenphone Ltd. has become SOX successful for the year 2006, 2007 and 2008. organizational development. The Management undertakes an action plan based on the i) Compliance with Rules & Regulations of the Country survey results. IVC contributes to ensuring a fair, transparent and professional working As the leaders of a compliant company, the Management Team of Grameenphone is environment in Grameenphone. accountable not only to its Board or Shareholders but also to various external regulatory bodies Grameenphone believes in transparency and accountability to society as a whole through of this country. These regulatory bodies maintain a close monitoring process on Grameenphone, establishment of efficient and effective Corporate Governance procedure. It also believes that in this context, the Company provides full-fledge financial reports to the National Board of Corporate Governance is a journey not a destination and it needs to be continuously Revenue (NBR), Registrar of Joint Stock Companies & Firms (RJSC), Bangladesh developed and adapted to meet the changing needs of a modern business. Telecommunication Regulatory Commission (BTRC) and the Board of Investment (BOI). In compliance with the law of the Securities and Exchange Commission (SEC), Grameenphone has converted its status in 2007 to a public limited company from its earlier status as private limited company. Besides, in order to conduct day to day business Grameenphone has been rendering its best effort to comply with the existing applicable laws of the country as well as with the directives/ guideline of various Government Authorities.

GP AR’08 86 87 A Partnership Approach to CSR Bangladesh’s socio-economic development is a mutually inclusive agenda for individuals and corporate entities. As is the case with any major change, this can only be effected through transformation of approach and concerted meaningful collaboration that encompasses cross-sector partnerships. Hence, Grameenphone takes a partnership approach to CSR and aims to provide long-term assistance through relevant development agencies and seeks to draw synergies with Grameenphone’s core competency i.e. empowering people through connectivity wherever possible. Grameenphone recognizes the enormous potential for social and economic benefits to Bangladesh through telecommunication. We have a role to play in ensuring that these benefits are accessible to as many sections of the society as possible. This belief is crystallized as one of the key priorities in our CSR strategy. At Grameenphone, we live by the saying, “Development is a journey, not a destination.” Our work is not just about ensuring connectivity; it is about connecting with people and building a relationship based on trust with our subscribers, business partners,

employees, shareholders as well as the wider community, in general. eopl P e

Report on CSR

t We believe that good development is good n l a e i B business. While maintaining business focus, c m u t s o s i S e n taking the nation forward remains our top v Corporate e

s n

I priority. Thus our relationship with Bangladesh Social s Responsibility is built on a partnership which strives to achieve common economic and social goals. P ro d t u en ct m on Grameenphone’s vision - here to help - is one that we take very seriously. Envir GP is geared to invest beyond business through its CSR initiatives and committed to work hand in hand with the Government of Bangladesh and other development agencies in meeting the Millennium Development Goals (MDGs) of the country. We The key elements take pride in our social investments in four core areas, namely poverty alleviation, of our response healthcare, empowerment and education. to stakeholders Grameenphone’s contribution towards achieving the development targets of Bangladesh is channelized through its social investments targeting the bottom 50% of the socio-economic segment of the population. When it comes to being involved in the community, we believe that sustainable development can only be achieved through long-term socio-economic growth. Keeping that in mind, Grameenphone is committed to introducing innovative but relevant social service products such as 789 Healthline, Community Information Centers, CellBazaar, etc., as well as invest beyond business through its community development initiatives to assist in meeting the MDG targets for Bangladesh. It’s been two years since we have set out on our CSR journey through a framework approach. Progress has been significant but we still have a long way to go. As our journey continues, we aim to consolidate our commitments, maintain transparency and enable stakeholders to assess our performance in all areas. In view of that, Grameenphone has published its first Corporate Social Responsibility Report in December 2008.

GP AR’08 88 89

88_Page Page_89 CSR Initiatives - 2008 GP launched a full-fledged blood bank at Rafatullah Community Hospital (RCH) in Bogra, a health initiative of Thengamara Mohila Sabuj Sangha (TMSS). This is the first and the largest blood bank in the Health northern region funded by a private organization. Through our healthcare initiatives, we aim to contribute towards achieving the targets related to MDG 4, 5, and 6, i.e. reduce child mortality, improve maternal health, and combat HIV/AIDs, Malaria and other Since May 2007, Grameenphone has been working with UNAIDS to raise awareness and advocate for diseases. necessary policy reforms on HIV/AIDS through different communication channels. In 2008, we carried out a month-long media campaign around World AIDS Day (Dec 1), including press advertisements, In May 2007, in partnership with Pathfinder International, we launched the Safe Motherhood and Infant radio announcements, TV talk-show, round-table sessions, billboards, etc. Care Project, and through USAID’s network of 318 Smiling Sun Clinics in 61 districts, we are providing free but comprehensive health-care services essentially to all poor mothers and their infants nationwide. We We have been partnering with the Expanded Immunization Program and WHO since April 2007 to have so far served a total of 940,251 economically disadvantaged mothers and infants. create effective awareness regarding National Immunization Day with a target to immunize more than 24 million under-5 children through vaccination. In 2008, during the 17th National Immunization Day Grameenphone, jointly with Sight Savers International, have been organizing free Eye Camps to ensure (NID), we extended our support through Newspaper announcements and SMS alerts targeting the eye-care services to the disadvantaged segment of our population since 2007. In 2008 alone, GP parents. organized six free eye camps at Barisal, Comilla, Sylhet, Lalmonirhat, Tangail and Moheshkhali. In total, 10,931 patients were benefited with free eye care support through these camps, while 1,175 patients Empowerment were administered Intra Ocular lens or cataract surgeries. We are committed to facilitate empowerment opportunities to the vulnerable segment of the society, so that it enables them to better influence the course of their lives and live a life of their own choice. We are the proud sponsor of Bangladesh Special Olympics team since 2007. The team received 71 medals in the Special Olympic Games 2007 in Beijing, China. As a part of that partnership, we organized the 1st regional talent hunt in Rajshahi Division, for intellectually-challenged athletes in November 2008. The objective is to form a “national talent pool” of intellectually-challenged athletes, who would be further nurtured and groomed to participate in the next Special Olympics in 2011. The Information Boat Project sailed out of a partnership between Grameenphone and CARE Bangladesh in December 2007 whereby information hubs are being created to meet the communication needs of rural communities, especially in the Char and Haor areas. These boats are equipped with digital contents, such as livelihood and agricultural information, suited for the specific areas served by the designated boats. At the same time, skilled trainers from CARE Bangladesh provide training to the local community people on different livelihood options. Education As one of the Millennium Development Goals (MDG 2) is to ensure universal primary education to all, education is one of the key focus areas of Grameenphone’s social investments. In collaboration with Grameen Shikkha, a sister concern of Grameen Bank, we provide annual scholarships to some 100 bright but underprivileged students, at different academic levels, through a scholarship fund. Of these scholarships, 60% are aimed towards female students. Grameenphone, as part of its rehabilitation plans in the cyclone SIDR-affected areas, initiated construction work for four education center-cum-cyclone shelters in the southern belt of the country. These cyclone shelters would be used as education centers throughout the year to provide non-formal primary education to underprivileged children of the locality. RDF and Shushilan, two local NGOs that operate in the selected areas, are responsible for the overall management of the project, including the operation of these schools. We also initiated a CSR project, in partnership with Centre for Bangladesh Liberation War Studies, to publish and distribute illustrated books on Liberation War for school-going children, with the objective to inspire them with the heroic stories of our freedom-fighters. The series consists of a total of six books. Tagra’, the first book of the series, was published and distributed among the students of Dhaka division only in 2008. Emergency Assistance During natural calamities, be it flood, storm surge, cold wave, or landslide, Grameenphone has always extended its support to the affected, vulnerable people. We distributed 3,000 blankets in different SIDR affected areas of Barisal and Khulna districts earlier in February 2008. The company also distributed 11,000 blankets in the worst affected areas of Dhaka, Rajshahi and Chittagong division during the prevalent cold weather in December 2008.

GP AR’08 90 91

88_Page Page_89 As a responsible business, Environmental Grameenphone recognizes that our operations may have a potential impact on the environment. While the Management in Grameenphone nature of our business is such that we are not a heavy polluter, with more – towards sustainability than 20 million subscribers, around 4,700 employees, hundreds of installations and a significant number of office buildings, our collective impact on the environment is quite considerable. Therefore, we have adopted systematic processes to ensure that, wherever possible, we manage and mitigate the probable negative impact of our business activities on the environment.

Climate Change Project Use of Energy Climate change is widely recognized as the greatest Offices [15%] global sustainability challenge. Its implications are Transport [15%] far-reaching for the environment, for people, and for the global economy. With climate change come new Network [70%] threats to the environment and new challenges to companies like ours. As we grow and our networks develop, our energy demands increase. This requires us to work even harder to meet sustainable energy targets and reduce our CO2 emissions. We are determined to meet these challenges head-on. Source of Energy “Climate Change Project” of GP was kicked off in Other [23%] February 2008 as part of the Telenor’s global Grid [77%] program to cater one of the most important strategic targets of supporting the environment by reducing CO2 emission. Because of the operational growth, GP became the second largest CO2 emitter (about 70K Tons) in 2006 amongst all Telenor operating companies as per some internal survey documents. On an average, network installations contributed about 70%, office buildings 15% while travels and transportation caused 15% of this total emission. Telenor’s global target is to reduce total emission by 30% (2007 base figure) by 2011 and 40% by 2016.

GP AR’08 92 93

92_Page Page_93 Green Energy Usage Embracing this concept recently, Grameenphone has introduced two hybrid solar-powered base station sites at Habiganj. This is a new concept and has only been tried out in a few countries so far. The two sites, set up on an experimental basis, have been designed to supply power to the base stations for three consecutive days, without any requirement for sunlight to recharge. This backup system will ensure Grameenphone’s network Responsible Network Deployment availability in case of any prolonged inadvertent shutdown of the national With more than 11,800 base stations at over 6800 sites, our power grid. If these pilots are proved to be successful, 60 such solar projects national network is the foundation of our business. It must will be rolled out in other parts of the country by 2009. fulfill the technical network requirements for improved Grameenphone has also taken initiative to introduce wind turbine at BTS coverage for our customers, while balancing the sites to produce electricity. 5 wind turbines will be installed in the coastal expectations of the community and impact on the local areas by 2009 on an experimental basis. environment. Various measures have been taken into account to address these issues. Corporate Headquarter – a greener future The vision of the Corporate Head Quarter project is to build the region’s Heat, Ventilation and Air-condition (HVAC) Optimization leading workplace for creative and productive performance. To realize this BTS Temperature Controller, which aims to reduce total vision, an intelligent and innovative building is envisaged. In other words, our power consumption, is being installed at some sites on a test future corporate headquarter will be environmentally friendly and basis. It has been estimated that, using this controller, each technically flexible to withstand the change of time, and supportive to site may save up to 24 KW of electricity per day. innovative work processes and styles that encourage knowledge sharing Optimization of Power Usage and CO2 Emission and avoid wastage. Voltage Dependent Timer Controllers optimize the generator’s running hour. It has been estimated that, after its In designing the electro-mechanical aspects of the building, the installation, the average running time for a generator may be following factors were taken into consideration. reduced by 50%. As running time decreases, it causes • Energy efficiency reduction of CO2 emission in the environment. • Water conservation • Improved indoor air quality • Natural lighting • Emission control • Building maintenance • Innovation

The end-result will be some solutions of technical superiority: Cogeneration Own power generation by means of cogeneration would reduce the power consumption by 60% in addition to the tremendous reduction of emission. Fenestration Double-layered glass is expected to reduce solar heat gain and thus reduce the cooling load by a considerable amount. Reusage of water The water from lavatories would be recycled and will be reused in the commode flush. Waste water treatment Before draining the waste water into the national drainage system, it will be treated in the waste treatment plant in order to leave less contaminative waste to the environment. Open office CHQ is aiming for a paper-less and open work-desk solution which will reduce the paper usage to a minimum.

GP AR’08 94 95

94_Page Page_95 Since the beginning of its operations in Bangladesh, Grameenphone has believed that its most valuable assets are its people. At the same time, one of the most important tasks for GP has been making the working place attractive and safe for employees, as well as for other stakeholders. GP Health Safety Security & Environment (HSSE) began its journey in 2001. Today the HSSE team is equipped with preventive, curative health support and health benefit upto the family level. A full-fledged health team is present in the office to support Grameenphone employees with medical consultancy, in addition to a 24x7 medical hotline service ‘78274’ for employees and their family members, First-aid and different health hygiene trainings, First-aid box management, emergency Report on management and on-job injury. There are facilities for regular vaccination, yearly executive health check-up, pre-employment check-ups as preventive measures. Health Safety Grameenphone employees and their dependants are covered by a comprehensive health insurance plan. Employees also receive certain discount facilities and benefits from various medical institutions Security & Environment at home and abroad. An outstanding initiative in the corporate world is Grameenphone’s daycare center ‘Happy Hearts’ for employee children, which is a great example of the company’s social commitment. In May 2008, evidence of hazardous health and environmental conditions were documented in factories belonging to some of Grameenphone vendors. At the same time, Telenor was made aware of instances of minors involved in hazardous and illegal labor by Grameenphone suppliers. In response to this crisis, Telenor decided to launch the Global HIT project at all its OpCos, with Grameenphone playing a lead role among the OpCos in implementing the project. The Global HIT project was incorporated into its regular activities by the HSSE Department of Grameenphone and the project was formally launched in May 2008 as the GP-HIT project. The project was launched to encompass a new phase of compliance control, follow up activities and further measures to improve routines and practices, as a continuous process. The work that Telenor initiated to enhance the HSSE-standard throughout the value chain follows three main principles: Continuous improvement, risk-based approach, and control according to local law and international conventions. Telenor has chosen Det Norske Veritas (DNV) as its advisor for the project, providing assistance and competence connected to the formal guidelines and follow-up of suppliers. Throughout the project, specific issues or dimensions, in association with the vendors, were chosen to work on. The key issues were eradication of child labor, proper compliance to employment-related issues and legislations, ensuring a safe and secured working environment, attaining emergency preparedness by the vendors and their employees, and finally creating and maintaining a sustainable level of awareness among team members regarding SR & HSSE Issues. As a part of the project activity, numerous audit/inspections, training sessions, idea-sharing sessions and risk assessments have been conducted both at GP’s own premises and at the vendors’ offices. Through these activities, the GP-HIT team was able to change the mindset of the vendors and inspire them to initiate necessary corrective measures regarding SR and HSSE issues, that have brought dramatic changes on work premises and on their attitude towards compliance to HSSE issues. These changes haven’t gone unnoticed; the dramatic changes, achieved jointly by Grameenphone and its vendors, have been heavily appreciated globally. Mid-way through the project, Det Norske Veritas issued a report based on its analysis of the potential risks to workers and the environment; the conditions were better than expected. The measurements show limited contamination to the external environment. Telenor has now come a long way towards improving the conditions pointed out by Det Norske Veritas. This only proves the success achieved by the GP-HIT team and reflects the efforts of those involved in the project. The next challenge is to maintain this success throughout the coming years. However, HSSE advancement does not stop here and it is now time to maintain the pace in the coming days. Further action plans have been set to maintain the success achieved so far. The project now moves to the second phase which involves second level vendors.

GP AR’08 96 97

96_Page Page_97 Employees are the greatest assets The employees of Grameenphone are its greatest assets. The 4,700 strong GP Team through their professionalism and dedication have played a pivotal role in achieving the success that Grameenphone enjoys today. According to a survey conducted by a leading market research firm in the last quarter on 2008, Grameenphone was found to be the most preferred employer in the country. SIRIUS Report on Marketing & Social Research Limited carried out the survey among students of top universities and employees of leading companies. Human Resource Grameenphone follows international and local best practices in its entire Human Resource Management process, to retain its position as one of the most attractive employers in the Market movement, inflation, country. Special attention is placed on attracting the right talents through a transparent recruitment individual performances and process, offering them challenging roles with an attractive benefit package and providing company affordability are key factors them adequate training opportunities with a clear career development path. Transparent recruitment process considered to reward and pay Grameenphone hires employees through different avenues based on business needs and competitive salaries. The organizational structure. All employees are hired through a transparent recruitment process using effective assessment methodologies and tools. The company does not discriminate compensation package includes against any job seeker or employee on the basis of religion, gender, race, color, age, or any salary and a wide range of monetary other factor that is not related to the individual's ability to perform the job. Grameenphone’s compensation structure is designed to attract, retain, motivate and and other attractive benefits. rewards skilled employees at all levels. The company compensation philosophy is to remain at the upper quartile of the market, maintain internal and external equity, thereby ensuring a fair and transparent system. Market movement, inflation, individual performances and company affordability are key factors considered to reward and pay competitive salaries. The compensation package includes salary and a wide range of monetary and other attractive benefits. In 2008, a total of 2174 employees were recruited in permanent positions which includes new recruitments, replacements and conversions from non-regular to regular position. The company also places emphasis on all Health, Safety and Environment (HSE) related issues in the workplace. An HSE policy provides detailed procedural guidelines and a separate unit ensures its implementation. A comprehensive group life and health insurance (hospitalization) coverage is also provided for all employees.

GP AR’08 98 99

98_Page Page_99 Grameenphone follows principles in line with the laws of the country that serve as a foundation for maintaining discipline among the employees. Employee grievances are addressed through an established process to safeguard employee rights and morale. Grameenphone provides a platform for employee interaction through events and Health & Recreational Centers, which act as stress relievers and facilitate work-life balance. Grameenphone was perhaps one of the first companies to provide day-care center facilities for children of working mothers nearby it corporate head offices. Codes of Conduct All employees are required to read and sign the Grameenphone Codes of Conduct document at the time of appointment. Grameenphone's guidelines for corporate ethics apply to all employees as well as others acting on behalf of Grameenphone. All Grameenphone employees and those acting on behalf of the company are responsible to comply with these guidelines. It has been clearly dictated that those who infringe Grameenphone's rules and guidelines will face consequences that are in line with the type and scope of the violation. It is Grameenphone's policy to comply with all applicable laws and governmental rules and regulations. It is the personal responsibility of each employee to adhere to the standards and restrictions imposed by those laws, rules and regulations, including those relating to accounting and auditing matters. People Development An annual assessment of all employees is done through the Performance Management Process (PMP). Individual employees make a self-assessment of their own performance based on the agreed key performance indicators (KPIs) through an online PMP tool. Later, the self-assessment is reviewed in a one-on-one meeting with their respective supervisors and finalized. The development needs of the employees are also identified during this process. Training in Grameenphone is primarily aimed at enhancing the employees’ job-related knowledge, skills and managerial competencies. Each year, the company invests significantly on employee development and training both at home and abroad. As a part of the company’s continuous effort towards organizational development, a pragmatic approach to people development was also introduced through the 3Es of Human Resources Development. The 3Es stand for: Experience--working on tasks and problems, increased responsibilities etc.; Exposure--feedback, coaching or mentoring etc.; and Education--training, conferences, academic courses etc. This approach utilizes diverse initiatives as opposed to traditional training driven people development approach.

G P A R ’ 0 8 100 101

100_Page Page_101 General Guidelines Corporate ethics are about more than avoiding contravention of any law; they are about how we behave towards each other and the outside world. Everybody associated with Grameenphone is responsible for following the rules and guidelines that build on Grameenphone's basic values and that form attitudes we can be proud of. Grameenphone's guidelines for corporate ethics apply to all employees of Grameenphone as well as others acting on behalf of Grameenphone. It is the company's policy to comply with all applicable laws and governmental rules and regulations. Codes of Conduct It is the personal responsibility of each employee to adhere to the standards and restrictions imposed by those laws, rules and regulations, including those relating to accounting and auditing matters. Human worth Grameenphone supports the international human rights as outlined by the UN declaration and conventions. No one shall in any way cause or contribute to the violation or circumvention of human rights. We place great importance on ensuring the compliance with employees’ basic human rights as outlined in the International Labour Organisation's core conventions. Working environment Grameenphone offers a professional and positive workplace with an inclusive working environment free from any discrimination. We do not tolerate any behaviour that can be perceived as degrading or threatening. Health and the environment Grameenphone is a pioneer in the field of health, safety and environment so as to promote high levels of satisfaction and good health. Loyalty, impartiality and conflict of interests Grameenphone respects the individual employee's right to a private life and private interests, but demands openness and loyalty to the company and the company's interests. Conflicts of interest could involve, but are not limited to, customers, suppliers, contractors, present or prospective employees, competitors or outside business activities. Confidentiality Every employee in the company has a duty of confidentiality by law and written agreement. Employees are encouraged to keep confidential all corporate and other matters that could provide third parties unauthorised access to confidential information, and exercise caution when discussing internal affairs so as to avoid being overheard by unauthorised persons. The duty of confidentiality also applies after the conclusion of employment or contractual relationship with Grameenphone for as long as the information is considered to be of a sensitive nature or in any other way confidential. Protection of personal data All processing of Personal Data is subject to the care and awareness which is required according to law and regulations and relevant for information that might be sensitive, regardless whether the data refer to customers, employees or others.

G P A R ’ 0 8 102 103

102_Page Page_103 Nature and the environment Grameenphone is a pioneer regarding environmental protection, and actively takes steps to minimizing environmental damage and develops, promotes and utilizes environmentally-friendly technology. Intellectual property It is the duty of all Grameenphone employees to Information that may affect the stock price protect the company's intellectual property and Grameenphone is subject to strict rules as a subsidiary of Telenor concerning the handling administer this precaution in the interest of the of non-public information that may affect the market price of any publicly listed company’s company. shares or other financial instruments. In this context the deciding factor is how a normal investor would have reacted to this information if it had been included in that investor's Property and assets decision making. Grameenphone's property and assets, e.g. buildings and equipment, are managed and safeguarded in an Employees in possession of such information are responsible for protecting the said appropriate manner. information and preventing its access to unauthorized persons before it has been received by the stock exchange and made available through the stock exchanges' information system, or before the information ceases to be sensitive. Information, communication and contact with the media All information from Grameenphone shall be reliable and correct, and maintain high professional and ethical standards. All employees who, through their work, deal with information are responsible for meeting these standards. Communication with the media, the public and the financial markets take place in accordance with established guidelines and routines and satisfy the regulations and practice applicable to publicly listed companies. Expertise and authority All decisions shall be made at the appropriate level in accordance with the applicable regulations concerning authority. Accounting Grameenphone's accounting shall ensure that all transactions are correctly registered in accordance with the prevailing laws of the land and good accounting practices. Company's regulations concerning the registration of transactions and proper documentation are strictly followed and all employees share a responsibility, where appropriate, to ensure that business transactions are fully and correctly reported and documented, in accordance with applicable accounting practices. The company’s annual accounts, interim accounts and other forms of financial reporting are in accordance with the law, IFRS and good accounting practice. Reporting and disclosure Grameenphone's reporting complies with the applicable laws and regulations and be full, fair, accurate, timely and understandable. Internal control Grameenphone shall have good internal controls that ensure that the company's goals and strategies are fulfilled and complied with. Gifts and business courtesies Caution is advised in relation to offering or accepting gifts and business courtesies in Grameenphone. Employees are expected not to accept gifts or other remuneration if there is reason to believe that its purpose is to influence business decisions.

G P A R ’ 0 8 104 105 Products & Services

Grameenphone’s foot print covers almost 100% of the population of the country. After 11 years of successful operations, Grameenphone has become the largest integrated communications service provider with nearly 21 million subscribers, as of December 2008. Since its inception in 1997 Grameenphone has been at the forefront of technology. The company is focusing on the introduction of affordable data products and services to provide even easier access to the information highway under the brand promise that “the light will find its way.” In this manner Grameenphone continues to steer the course of the telecom sector in the country with its world-class products and services. Products The company categories its products into four business segments, Consumer (Prepaid and Postpaid products, i.e smile & xplore packages respectively), Business (Business Solutions), Youth (djuice) and Emerging Markets (GP Public Phone and the Village Phone). smile smile prepaid brings the world of limitless possibilities. The service helps give words to every feeling, an expression to every emotion. smile subscribers enjoy a flat tariff to call all operators and three FnF (Friends & Family) numbers at a competitive rate. It has the widest recharge options, FlexiLoad/Scratch Card/Balance Transfer, and its The light will find its way simple recharge saves from the hassles of rental and deposits, allowing refilling from Tk. 10 to Tk. 1000. In addition to all that, prepaid customers can enjoy international roaming facility and internet service from their mobile phones. xplore Life becomes simpler with the Grameenphone xplore postpaid package. xplore provides unlimited freedom to reach out to people. In addition, the postpaid service provides 6-12% discount on monthly bill through Thankyou bonuses. The connection come pre-activated with EDGE, allowing easy internet access from the mobile handset. djuice djuice was the first product designed to attract the youth in Bangladesh. The brand positions itself as a youth life-style choice. djuice subscribers can connect with more than 3.2 million djuice friends at a special flat rate. djuice customers enjoy the widest collection of value added services, including the lifestyle benefit ‘xtra-khatir’. In addition, all djuice subscribers receive other facilities enjoyed by prepaid and postpaid customers.

G P A R ’ 0 8 106 107

106_Page Page_107 Business Solutions Business Solutions is a complete, quality business communications service from Grameenphone – The internationally acclaimed Village Phone Program designed especially for the business community in Bangladesh. When Business Solutions was launched, started on the same day of commercial operations of it was for the time that this kind service was introduced in Bangladesh. Grameenphone in March 1997. Today, Village Phone Business Solution comes with a special service – ‘Closed User Group’ (CUG) – which allows employees of operators provide telecommunication services in over an organization to communicate between themselves at a special low rate. 58,000 villages and 64 districts of the country. The Business Solution offers unlimited access to the internet through the mobile handset. Also, special rates Village Phone Program is a unique initiative to provide are offered to the clients under ‘Volume Incentive Discount’ (VID). The discount amount is calculated telecommunication facilities in remote, rural areas all using a two-fold matrix where company airtime usage was considered first and discount were given to over Bangladesh. the individual accounts of the respective company based on those figures. At the beginning of last year, Business Solution, for the first time in Bangladesh, also introduced the BlackBerry® service – one of the most innovative and prestigious corporate communication tools in Bangladesh. BlackBerry smartphones provide Grameenphone customers with access to a wide range of mobile applications, including email, browsing, messaging, phone, organizers, multimedia and a wide range of other business and lifestyle applications. Village Phone & GP Public Phone The internationally acclaimed Village Phone Program started on the same day of commercial operations of Grameenphone in March 1997. Today, Village Phone operators provide telecommunication services in over 58,000 villages and 64 districts of the country. The Village Phone Program is a unique initiative to provide telecommunication facilities in remote, rural areas all over Bangladesh. The Village Phone is a shared access model which links the telecommunications sector with the microfinance sector to enable microfinance clients, especially women, to borrow the money needed to establish Village Phone business in rural areas. Village Phones have proven their immense potential in boosting income of poor households in rural areas, promoting health care, development of agri-business and in the social empowerment of rural women. All Village Phones were converted to prepaid products for greater convenience of the subscribers. The Village Phone Program has also been replicated in a number of countries including Uganda and Rwanda in Africa. Services The businesses at Grameenphone have been structured into three individual strategic business units (SBU’s) - Voice Services, Messaging Services and VAS, Internet and Data Services. Voice services The voice service business provides high quality, reliable and professional voice communication services allowing people to communicate locally and internationally across 55 countries, using economy ISD (012) connectivity. The service also provides special rates within specific communities (Closed User Groups) and on specific Grameenphone numbers. In addition to that, there is a special service titled ‘Pay 4 Me,’ which allows subscribers at the receiving end to accept and pay for a call. Message services Messaging Services offers people a much more efficient and cost-effective way of communication. The service allows users to send a Voice SMS anywhere within the country, or a text SMS anywhere in the country as well as abroad. Another special service is the Multi Media Service (MMS), which allows users to share pictures, animation, music, video clips and text messages with others. News Push is another valued service through which news headlines can be pushed to subscribers through SMS. Data services Internet and Data Service allows Grameenphone users to access the internet from their handsets through GP’s EDGE-enabled network. The mobile data service allows transfer/share of data over a mobile network, access remote servers, and access the Internet from a PC. An additional feature - Mobile Fax - allows sending and receiving SMS through any remote fax machine using any mobile phone.

G P A R ’ 0 8 108 109 1. General Authorized Capital : BDT 40,000,000,000 Issued and Fully Paid up Capital : BDT 12,151,747,970 Class of Shares : Ordinary Shares of BDT 1.00 each Voting Rights : One vote per Ordinary Share

2. Distribution of Shareholdings Name of Shareholders Number of ordinary Paid up Percentage 31st December shares held Capital in (BDT) 2008 Telenor Mobile Communications AS 7,534,077,085 7,534,077,085 62.00% Nye Telenor Mobile Communications II AS 2,150 2,150 0.00% Nye Telenor Mobile Communications III AS 2,150 2,150 0.00% Telenor Asia Pte. Ltd. 2,150 2,150 0.00% Grameen Telecom 4,617,664,005 4,617,664,005 38.00% Grameen Kalyan 215 215 0.00% Grameen Shakti 215 215 0.00% Total 12,151,747,970 12,151,747,970 100.00%

3. Dividend Cash Dividend for 2008 13% of paid up Capital Useful Information 4. Company Website Users of the Annual Report can access the 2008 Annual Report and obtain for Shareholders information about Grameenphone and its products and service via the internet on our website at www.grameenphone.com.

G P A R ’ 0 8 110 111 This “Annual Report” includes "forward-looking statements." These forward-looking statements may include, without limitation, statements relating to our future business development and economic Disclaimer performance, future earnings and cash flow, our business strategy, regulatory changes, future policy of the Bangladesh Government relating to the telecommunications industry in Bangladesh, our competitive position and the effects of competition, and the amount and nature of our capital expenditures and capital commitments. The forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. You are cautioned not to rely on these forward-looking statements. A number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement. We have obtained certain market data, industry forecasts and data used in this “Annual Report” from market research, publicly available information, including governmental publications, and industry publications. Industry publications generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of the information is not guaranteed. While we believe these industry forecasts and market data are reliable, we have not independently verified this information, and we make no representation as to the accuracy of this information. Because the market data included in this “Annual Report” is derived from multiple sources, you should not assume that it has been compiled on a consistent basis. You should exercise caution when comparing market data from different sources or across different time periods. We make no representation that such market data is accurate or complete or that it has been compiled or presented on a consistent basis.

G P A R ’ 0 8 112 113

112_Page Page_113 116_Page Page_Inner Back